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Feb 7, 2012

Health Insurance Terms - Deductibles

People can be confused about insurance terms when deciding which plan best meets their needs. A term like deductible is important because it determines both the amount of premium you will pay each month as well as the amount you will have to pay out of your pocket for medical expenses. Most people these days only think about co insurance when they think about health insurance benefits. But the doctor visit and prescription drug co payments are minor in terms of what you need insurance for. Most people can handle the cost of a doctor visit or prescription drug out of their pocket without insurance. It is nice to have the extra benefits, but nobody will lose their savings or house for incurring a doctor visit bill or prescription bill.
The deductible is actually the most important consideration in purchasing any kind of insurance. With auto insurance, it is the amount you will pay after you have damaged your car before the insurance company starts to pay anything. If you have a 100 dollar deductible, you will be able to get your repairs done no matter the cost to complete it and only pay 100 dollars. Similarly with medical insurance, if you are hospitalized or have a major surgery, your bill could be as high as 100 or 200 thousand dollars. Anti-venom from a snake bite can cost as much as 25,000 dollars. If you get bitten by a snake, you will want the anti-venom for sure. But nobody budgets for such a cost. This is where the deductible comes in. If you have a lower deductible of 500 dollars then after you have paid 500 dollars for medical services, the insurance company will start to pay. Some people opt for a higher deductible of 5,000 or even 10,000 dollars to protect them only in the event of a catastrophic medical event. They understand that they will have to pay that amount before the insurance starts to pay, but a plan with a 10,000 dollar deductible will cost much less than a plan with a 500 dollar deductible.