When you’re shopping for coverage with an insurance company, you may have several options from which to choose. Having some knowledge of the basic terminology is beneficial in understanding the plans and picking the one that works best for you.
What’s one of the most important things to learn about? Deductibles!
Keep reading to learn everything you need to know about deductibles to make the most informed decision for your insurance plan.
- A deductible is the amount of money you pay out-of-pocket for a service before your insurance plan begins to pay.
- A premium is the upfront amount of money per month you pay for the insurance itself.
- There are two different types of deductible plans: 1) a high-deductible plan and 2) a low-deductible plan.
- Choosing the best deductible plan for you depends on your needs. Decision factors can include health, medication, household dependents, and unexpected out-of-pocket costs.
What is a deductible?
To start you off on your deductible journey, we need to define one. What exactly is a deductible?
A deductible is the amount of money you pay out-of-pocket for a service before your insurance plan kicks in and begins to pay. It’s a key component to many types of insurance plans and is often found in coverages for homeowners, auto-insurance, and renter policies.
Here’s a concrete example. Let’s say your health insurance plan has a $500 deductible. You have to have surgery, and the procedure will cost $1000. You would pay $500 towards your medical expenses, and your insurance company will pay the remaining $500.
Depending on your plan, the amount of the deductible can be high or low.
Watch the video below to get a quick rundown on deductibles.
Deductibles 101: Everything you need to know about deductibles.
Let’s dive into high-deductible plans! The name of the plan is exactly what you get: A high-deductible plan has a high deductible.
Why go for a high-deductible plan?
With this type of plan, you often pay a lower premium, the amount of money you pay per month for the insurance itself. Spending less money in the upfront premium is the trade-off for paying more out of pocket if an accident occurs.
People who go with a high-deductible plan tend to be those who are generally healthy and don’t anticipate having many medical expenses, such as doctor’s appointments or prescriptions, in the upcoming period.
Downsides to a high-deductible plan
One drawback of a high-deductible plan is, again, the high price of the deductible. In an emergency, meeting the high deductible could be difficult to pay out-of-pocket. The deductible could be particularly high.
Additionally, for some, there could be a risk of skipping out on medical needs to save money.
Onto low-deductible plans! This type of plan is the opposite of a high-deductible plan. A low-deductible plan has a low deductible.
Why go for a low-deductible plan?
In a low-deductible plan, you save on out-of-pocket costs on expenses during the period. If you know you and your family require lots of trips to the doctor or lots of prescription drugs, a low-deductible plan might be best for you. Having a fixed premium can help you budget and manage your medical expenses.
Downsides to a low-deductible plan
The high monthly premium is one of the downsides to this plan. In exchange for that large premium, your insurance company agrees to take on more of the costs after an accident or injury.
If you have a low-deductible plan but don’t often get sick, the amount of money spent might seem wasteful.
Choosing the Best Plan for You
High-deductible plans usually appeal to those who anticipate having few medical expenses in the upcoming period, while low-deductible plans typically appeal to those anticipating many medical expenses.
There is no one right plan for everyone. Every person’s situation is different, and that’s why we’re here to help you find your best fit.
Would you like to review your plan? Reach out to me today!