Washington State Insurance Practice Exam

In terms of health insurance, what does the term "deductible" refer to?

1. The amount the insured pays before the insurance company pays

2. The amount paid for every visit

3. The maximum out-of-pocket expense

4. The portion covered by governmental programs

The correct answer is: The amount the insured pays before the insurance company pays

The term "deductible" refers specifically to the amount that the insured individual is required to pay out-of-pocket for healthcare expenses before their insurance plan begins to contribute its share of coverage. This means that if a health insurance policy has a deductible of $1,000, the insured must pay that amount in eligible medical expenses before the insurance provider starts to cover additional costs. Deductibles serve as a mechanism for sharing costs between the insured and the insurer, encouraging responsible use of healthcare services. The concept is an important part of health insurance policies, as it impacts how much the insured ultimately pays for medical care each year. Understanding how deductibles function can help individuals better manage their healthcare expenses and budgeting for medical costs.