Many people are confused about the differences between deductible, coinsurance, and copayment. What are they and how do they differ between them?
In short, all three represent the portion of medical expenses that you are responsible for if you become ill or injured, otherwise known as out-of-pocket expenses. Either way, there are some unique differences between each and we are here to help guide you and understand what each one means in detail.
A deductible is usually a fixed amount that you will have to pay out of your pocket before the insurance covers the remaining eligible expenses. Depending on the insurance plan, the deductible can range from $ 0 to thousands of dollars. This can also be paid per illness or injury (per condition) or per certificate period. As a general rule of thumb, the higher the deductible, the lower your premium (the price you buy the plan for), and vice versa – but always make sure to choose the deductible that is appropriate for your circumstances when purchasing an insurance policy.
Typically, coinsurance is a percentage and represents the percentage of the cost that you will need to pay, and the insurance plan will pay for your remaining eligible medical expenses. Some common examples of coinsurance include 100%, 80/20, 90/10, and 50/50, so if you have 80/20 coinsurance in your insurance plan, this means that the insurance company will cover 80% of your medical expenses and you are responsible for paying the other 20% yourself. A deductible is commonly used with coinsurance. In this case, you would pay the deductible amount first, and then you would have the remaining coinsurance amount.
Copays are similar to deductibles and are usually a fixed amount of money that you have to pay each time you need to use your insurance plan. Unlike deductibles, copays tend to be smaller amounts and are applied per visit, so you would have to pay each visit.
With most insurance plans, you will typically see some combinations of deductible, coinsurance, and copayments, or in some cases, your plan may not have any of them. It will depend a lot on your specific insurance plan, so be sure to review the details of your policy so you know what out-of-pocket payments there will be. For more information on insurance terms and to help guide you later, please visit our insurance explained section where we delve into all areas of insurance to help you better understand insurance plans!