How Insurance Deductible Works? 5 Tips to Know

Insurance Deductible

How Insurance Deductible Works?


You probably know about the deductible, but you might be wondering how it works. Your insurance company will inform you of the amount of the deductible before you purchase a policy, and they will explain to you how much you can expect to pay out of pocket.

However, you may not know that there are also copays and cost sharing amounts that don’t count towards your deductible.

These can add up and can make your deductible amount higher than you originally thought.

how insurance deductible works



Insurance deductibles and copays are two different ways to pay for medical expenses. You’ll typically have to pay the deductible first, then pay a copay.

Depending on your health insurance policy, copays can count toward the deductible or they won’t. In some cases, copays can even be used as a reduction towards the deductible.

If you’re wondering whether or not your copays count toward your deductible, you can check with your insurance company by reviewing the Summary of Benefits and Coverage.

While you may not realize it, health insurance companies use copays and insurance deductibles to set the amount of money you’ll have to pay for different services.

You can lower your out-of-pocket expenses by using a health insurance provider that’s in the same network as your insurance company. Additionally, you can use a prescription discount card, like SingleCare, to lower your prescription copays.


You may wonder how coinsurance works with an insurance deductible. In theory, everyone pays 20% of the cost of an MRI, with their health insurance covering the rest. But this isn’t how coinsurance works in practice.

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Top 10 things you need to know about insurance deductibles

In fact, a health insurance deductible doesn’t require everyone to pay a certain amount of coinsurance, and you may be surprised at how much you can actually save. Let’s take a look at a real-life example.

Suppose Ben, a security expert, lives in suburban Philadelphia with his family. His 3-year-old recently fell at a playground, and now he’s paying 20% of the cost of the MRI.

As the name implies, coinsurance works by requiring you to pay a percentage of the cost of covered medical and healthcare services. In practice, this amount is often a fixed percentage of the cost.

If a drug costs $70 and you have a 30% coinsurance, you’ll pay $30, and your health insurance will pay the remaining $670. In theory, coinsurance will reduce the cost of a medical bill and keep your health insurance premiums low.

Percentage-based deductibles

The use of percentage-based deductibles in insurance is a growing trend in the insurance industry. These deductibles, which are often tied to a property’s value, reduce an insurance company’s exposure to claims by a certain amount.

While a typical claimant will know the deductible amount before filing a claim, a percentage-based deductible may not be known until after the loss is figured.

Generally, a percentage-based deductible applies to losses that are a percentage of the total insured value. In addition, deductible amounts can vary depending on the size of the loss and the language of the policy.

When choosing a home insurance policy, you should consider the percentage-based deductible. This type of deductible is typically associated with hurricane-related and wind/hail/named storm claims.

As its name implies, a percentage-based deductible will be a percentage of the insured value of the home.

For example, a 1% hurricane deductible will require you to pay $3,000 out-of-pocket for a claim worth $300,000. A 10% deductible will result in a $1300 difference in premiums.

See also
What is an Underwriter in Insurance? 5 Facts to Know (Explained)

Cost sharing amounts don’t count towards your deductible

You might be wondering what does a copay or deductible amount really mean. This amount refers to how much you pay at a doctor’s office.

For example, you might pay $20 per office visit and the insurance will pay the remaining $80.

The deductible is the first part of your health care bill before your insurer pays for some of your services. This is also known as cost sharing.

The deductible is the first $1,000 of health care expenses you pay each year.

If your health insurance plan has a $1,000 deductible, then the first thousand dollars of health care services you receive will be covered at full cost. Once you reach this deductible, however, you begin receiving cost-sharing benefits.

For example, if you go to the doctor for a $100 x-ray, you may pay between $50 and $200, with your health insurance company covering the remaining $150.




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