Personal Finance / Unit 8: Insurance and Risk
8.2 Deductibles, Copays and Out-of-Pocket Costs
Notes
Insurance terms decide how much you pay when you make a claim.
- Deductible: the amount you pay first before the insurer starts paying. Higher deductible usually means a lower premium.
- Copay: a fixed fee for a service (like $25 for a doctor visit).
- Coinsurance: a percent you pay after the deductible. If it is 20%, the insurer pays 80%.
- Out-of-pocket maximum: the most you pay in a year for covered care.
- Example: $5,000 bill, $1,000 deductible, 20% coinsurance. You pay $1,000, plus 20% of the remaining $4,000, which is $800. Your cost is $1,800. The insurer pays $3,200.
Practice
What is a deductible?
You cover the deductible first.
A repair costs $2,500. You have a $500 deductible and the insurer pays the rest. How much does the insurer pay?
$2500 - 500 = 2000$.
Bill: $3,000. Deductible: $1,000. Coinsurance: 20% after the deductible. What do you pay in total?
You pay $1,000, then 20% of $2,000, which is $400. Total $1,400.
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