You’re likely familiar with having a deductible on your insurance policy. It’s the amount of money you’re responsible for before the insurance policy pays its part of your claim. Many of us learn this when we have auto accidents at a young age, and the insurance policy pays out a claim amount minus a $500 deductible (or other amount, $500 is the average for U.S. auto insurance).
From then on, you begin to have an understanding that some amount will be taken out of your claim payments. But then you go to a doctor’s appointment on your own for the first time and they have you fork over a $20 copay at the office. So, that’s your deductible, right? Not exactly. Let’s review what these different words and policy terms mean for you and your insurance.
Deductible: The amount you pay before the insurance company provides coverage for a loss, damage, or in health insurance – care provided. It is usually a set amount, although some policies may have it as a percentage of the loss. One example of this on the property side is earthquake insurance, which typically has percentage deductibles.
Example: A broken water line causes $3,500 worth of water damage to your home. You have a $1,000 deductible on your home insurance policy. Your insurance company provides you a check for the covered loss of $2,500 – the amount less the deductible.
Coinsurance (Health Insurance): Typically, a coinsurance amount is a set percentage that the insured must pay after the deductible is satisfied. It is plan dependent, but this is often an 80% amount.
Example: You have surgery to repair damage to your knee, with a resulting hospital bill of $4,000. Your health insurance plan has 80% coinsurance, leaving you responsible for 20% of the bill, or $800.
Example with deductible unmet: In the same example, but with an annual deductible of $1,000 that has not been met, you would be responsible for the first $1,000 and then 20% of the remaining $3,000 hospital bill, or $600 ($1,600 in total expense to you).
Coinsurance (Property Insurance): When a property insurance policy has a coinsurance clause, it typically means there is a requirement that the owner purchase a specific amount of coverage for a property’s cash or replacement value.
Example: You buy a new home worth $300,000 and the insurance company has an 80% coinsurance requirement. That means you must insure the home for at least 80% of its value, or $240,000.
Copayment (Copay): A copay is similar to coinsurance on health coverage but is most often a set amount that is due at the time of service.
Example: Your vision insurance policy has a $25 copay for office visits. You go to your regular annual eye exam and must pay $25 at the time of service to complete your copay provision.
Not all policies have the same amounts and options for these provisions. Our agents can help you understand the choices you have and how they may impact you if you have a claim. Let us know how we can help you!