PSI Ohio Insurance Practice Exam

What is the name for the amount that an insured must pay out-of-pocket before the insurer begins to pay?

1. Co-payment

2. Deductible

3. Premium

4. Out-of-pocket maximum

The correct answer is: Deductible

The term that refers to the amount an insured must pay out-of-pocket before the insurer starts to cover costs is known as the deductible. This is a critical component in many insurance policies, as it sets a threshold that must be met before the insurance benefits kick in. For example, if a policy has a deductible of $1,000, the insured would need to pay for the first $1,000 of their medical expenses out-of-pocket. After reaching this amount, the insurance provider would begin paying for additional expenses according to the terms of the policy. Understanding deductibles is important in managing personal finances related to healthcare or other insurance services, as it affects how much the insured must budget for potential out-of-pocket costs. The other terms provided, such as copayment and premium, refer to different aspects of insurance costs—copayments are fixed fees for specific services, and premiums are the regular payments made to maintain the insurance policy, rather than amounts paid out-of-pocket before they receive benefits. The out-of-pocket maximum refers to the most the insured would pay in total during a policy period, which is a separate concept from a deductible.