Deductible, Copay, Coinsurance: The 3 Terms Every Policyholder Must Know

Deductible

Your deductible is the amount you pay out of pocket before your insurance begins to contribute. If your plan has a $500 annual deductible, you pay the first $500 of covered medical costs each year entirely yourself. After that threshold, your insurer begins sharing costs.

Important: not all claims count toward your deductible. Preventive care is often exempt, and some services (like GP visits with a copay) may not apply to the deductible. Read your policy schedule carefully.

Copay

A copay (or copayment) is a fixed amount you pay for a specific service, regardless of the total cost. For example: $20 copay for a GP visit, $40 copay for a specialist, $10 copay per prescription. Copays are typically due at the time of service. They are simple and predictable.

Coinsurance

Coinsurance is the percentage of costs you share with your insurer after you have met your deductible. A plan with 80/20 coinsurance means the insurer pays 80% and you pay 20% of covered costs above your deductible. Coinsurance is where unexpected bills often arise — particularly for expensive hospital stays or procedures.

Out-of-Pocket Maximum

Most plans include an annual out-of-pocket maximum — the most you will ever pay in a single year, combining deductible, copays, and coinsurance. Once this cap is reached, the insurer pays 100% of covered costs for the remainder of the year. This is the most important number to check when evaluating a plan.