What is a deductible and how does it work?

A deductible is a predetermined amount of money that you, as the policyholder, must pay before your health insurance coverage starts to pay for certain medical expenses. It is an annual amount, meaning you must fulfill it each year. Essentially, the deductible acts as a threshold that you need to meet before your insurance begins covering costs. For instance, if you have a $500 deductible, you will have to pay the first $500 out of pocket for covered services before your insurance plan will contribute. Once you have reached your deductible, your insurance will typically cover a percentage of additional medical costs as outlined in your plan, resulting in you having to pay only a portion of the expenses. Deductibles help control insurance costs while encouraging individuals to maintain their health, as they take partial responsibility for their medical expenses.