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Health Insurance: 6 Terms You Need to Know

Understand How Health Insurance Works and Terms You Need to Know
Understand How Health Insurance Works and Terms You Need to Know

Understanding how insurance works can help make it work for you. Get started by learning these 6 key health insurance terms.

Learn What a Premium Is

1. Premium

A premium is what you pay for health insurance every month.

Learn What a Deductible Is

2. Deductible

A deductible is the amount you must pay for covered health care each year before your insurance begins to cover costs. For example, your deductible could be $1,000. That means you pay all of the bills for covered health care until you reach that amount.

Learn What a Copay Is

3. Copay

A fixed amount you pay for a covered service. Once a copay is paid, your insurance will handle the remainder of the covered medical expenses.

Learn What Coinsurance Is

4. Coinsurance

The percentage of costs you pay of a covered health care service (after you’ve paid your deductible). Your insurance will pay the rest. If your coinsurance for hospital care is 20%, it means you will pay for 20% of the costs, and your plan will pay the other 80%. If your plan has a deductible, the coinsurance is what you’ll pay for some services after meeting your deductible.

Learn What an Out-Of-Pocket Maximum/Limit is

5. Out-of-pocket maximum/limit

An out-of-pocket cost is one that you pay, “out of your own pocket.” An out-of-pocket maximum or limit is the cap on the amount of money you or your family will have to pay each year for covered services. After you reach your maximum, your insurance pays the full amount of covered medical costs for the rest of the year.

Learn What Network is

6. Network

The facilities, providers, and suppliers your health insurer or plan has contracted with to provide health care services. In-network copayments are usually less than out-of-network copayments.