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What is a deductible in insurance? Is it the same as premium or copay?
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Hello! Deductible, premium, and copay refer to different things in insurance policies.
The deductible is the amount you have to pay for services before the insurance provider will begin to cover any expenses. The premium is the amount the insurance company charges you monthly or annually for your insurance plan. A copay is a fixed fee you have to pay for a particular type of service that you have to pay regardless of whether you have met your deductible. The copay amount may or may not count towards meeting your deductible, depending on the plan.
For example, suppose you have a health insurance plan with a $500 monthly premium and a $2,000 deductible. The plan also imposes a copay of $20 for a doctor visit and $15 for a drug prescription. In this case, you have to pay your health insurance provider $500 each month (the premium) regardless of what kind of healthcare services you receive - you can think of this as the subscription fee for the plan. The $2,000 deductible means that you have to pay the first $2,000 of your healthcare expenses yourself. Once you exceed that amount, your insurance provider will begin to cover your expenses. The $20 copay for a doctor visit means that you have to pay a flat fee of $20 each time you visit the doctor, regardless of whether you have met your deductible or not.
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Hi there,
Insurance is quite tricky - make sure you fully read up on and understand this topic as during a case it can really run a number on you!
Put simply: We pay x amount per month to a "pot". This "pot" gets used anytime we have a serious issue. The purpose is simple: I'm paying x amount monthly so as to be "safe" from any crazy event that might disrupt my life. I'm pay a bit of a premium so as to have risk minimized in my life.
The amount we pay to that pot is the premium. The amount we get paid when an event occurs is the payout.
However, most policies essentially say "You have to pay x amount for us to pay the payout". For certain instances (big events), that is the deductible...it's how much you need to pay before the insurance company will give you the payout. For smaller payments (normally routine services), the copay is essentially your portion of pay (i.e. pay $50 for a doctor's appointment, and the insurance company pays the rest).
Make sense?
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Thank you, so if you are calculating revenues for the insurance provider the deductible won’t be a recurring revenue? How would you use it in case math if you want to find the insurance provider’s profit (per month or annual)
Hi! It depends on the question, but you would generally subtract it from the insurance provider's cost of coverage. For instance, if I am an insurance provider and you have just signed up for my $2,000-deductible plan and have incurred a $5,000 expense, then I only have to cover $3,000 of that (assuming 100% coverage), because the first $2,000 is the deductible, which comes out of your pocket. Deductibles are typically annual, though again this would depend on the question.
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