Deductibles, Co-insurance and Co-Pay: The Basics

When it comes to insurance, people often get confused because they don’t understand the insurance lingo. Among the things that cause the most confusion among people are deductibles, co-insurance and co-pay. All three concepts are about sharing costs with your insurance company. There are many different reasons why you are asked to share costs, mainly to reduce trivial or low expenses which add up for insurance companies.

Deductibles, Co-insurance and Co-Pay: The Basics

To begin with: Deductibles, Co-Insurance and Co-Pay are all different amounts you have to pay for insurance services, particularly health care services.

Let’s start with co-payments. These are fixed amounts you pay at the time of receiving a service you have insurance for. These amounts are normally set up front by insurance companies, and are also printed on your health insurance card. Co-pays are implemented to share expenses with the consumer and to cut the costs of insurance companies. Another reason why insurance companies establish co-pay amounts is so that people do not claim insurance for any trivial, minor conditions or injuries.

A deductible is a fixed amount of money that you have to pay before you can get any benefits from your coverage. For example, if your deductible is set at $1000, you would have to pay health care charges until you reach the amount of $1000. After that your charges are covered by your monthly premium. The deductible is calculated on a yearly basis, and have to be met before your coverage kicks in. Deductibles vary by plan and depend on what is covered under your insurance policy. Moreover, insurance companies have different policies on the services you can use before reaching your deductible.

Lastly, there is co-insurance. This is your share of the costs of a health service. Usually, it is a certain percentage of a service. For example, if your co-insurance is 10 percent and your health care bill is $100 you pay $10 while your insurance covers the rest of the bill. However, this only kicks in after you’ve reached your deductible.

So what does this mean?

When you compare insurance quotes, you will want to look at all three things. Choosing the best combination of deductible, co-pay and co-insurance depends solely on your needs. If you do not visit your doctor often, copays may not be a big concern when you’re shopping for coverage. Instead you might want to choose a policy with a high deductible in order to lower your monthly premiums. If you do visit doctors often though, you might want to choose a plan with low copays. This means, you’ll probably have to pay higher monthly premiums, but low, or no, co-pay rates.

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