What is the predetermined amount an insured must pay before their insurance coverage kicks in?

The predetermined amount an insured must pay before their insurance coverage kicks in is known as the deductible. This is a key feature of many insurance policies, including health insurance and workers' compensation insurance. The deductible represents the portion of a claim that the policyholder is responsible for paying before the insurer begins to cover any remaining eligible expenses.

For instance, if a policy has a deductible of $1,000, the insured would need to pay the first $1,000 of any applicable claim out of pocket. Only after this amount is paid will the insurance company start to cover costs according to the terms of the policy. This structure helps to manage claims and reduce the number of small claims made to the insurer, as the insured has an incentive to pay out of pocket for smaller expenses.

Other terms such as premium, excess, and co-insurance refer to different aspects of insurance. The premium is the amount paid regularly to maintain the policy, excess typically refers to a higher amount of deductible in some policies, and co-insurance is a cost-sharing measure where the insured pays a percentage of the costs after the deductible has been met. Understanding these distinctions is essential for grasping how insurance works effectively.