Deductible, premium, copay explained
The premium is what you pay every month to keep a policy. The deductible is what you pay yourself before the insurer starts paying for a claim. A copay is a flat fee for a visit or prescription, coinsurance is your percentage share after the deductible, and the out-of-pocket maximum is the most you pay in a year before the plan covers the rest.
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How to do it
- Find the summary of benefits for the policy, which uses these terms in a standard layout.
- Write down the monthly premium and multiply it by twelve for the yearly cost.
- Write down the deductible, and whether it applies per person or per family.
- Note the copays for the visits and prescriptions you actually use.
- Write down the coinsurance percentage and the plan's out-of-pocket maximum.
- For car and renters policies, check the deductible per claim and the coverage limits.
- Compare two plans by adding yearly premiums to the costs you expect in a normal year and in a bad year.
Stop and call a professional if
- A claim is denied and you think it should be covered: ask the insurer in writing for the reason and how to appeal.
- You are comparing complex policies such as disability or life insurance: ask a licensed agent who explains, not one who only sells.
Common mistakes
- Choosing the lowest premium without looking at the deductible.
- Assuming a copay counts the same way as coinsurance.
- Not checking whether your doctors are in the plan's network.
- Setting a car insurance deductible higher than your emergency fund can cover.
Quick self-check
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Teach this to someone
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Teach: Deductible, premium, copay explained
What to say
The premium is what you pay every month to keep a policy. The deductible is what you pay yourself before the insurer starts paying for a claim. A copay is a flat fee for a visit or prescription, coinsurance is your percentage share after the deductible, and the out-of-pocket maximum is the most you pay in a year before the plan covers the rest.
What to show, in order
- Find the summary of benefits for the policy, which uses these terms in a standard layout.
- Write down the monthly premium and multiply it by twelve for the yearly cost.
- Write down the deductible, and whether it applies per person or per family.
- Note the copays for the visits and prescriptions you actually use.
- Write down the coinsurance percentage and the plan's out-of-pocket maximum.
- For car and renters policies, check the deductible per claim and the coverage limits.
- Compare two plans by adding yearly premiums to the costs you expect in a normal year and in a bad year.
When to stop and call a professional
- A claim is denied and you think it should be covered: ask the insurer in writing for the reason and how to appeal.
- You are comparing complex policies such as disability or life insurance: ask a licensed agent who explains, not one who only sells.
The check question
Ask: What is a deductible?
Related skills
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- How to build an emergency fund
- Every skill in Money and Paperwork
Words on this page
Sources
- Standard summary of benefits and coverage for health plans, current plan year. Checked September 28, 2026.
Last reviewed . First published .