What is defined as the annual amount a policyholder must pay before insurance benefits kick in?

The term that describes the annual amount a policyholder must pay before insurance benefits are activated is known as a deductible. This is the out-of-pocket cost that the insured individual must reach before the insurance starts covering additional expenses related to healthcare or claims.

A deductible is a foundational concept in insurance policies, as it plays a crucial role in determining how much the policyholder is responsible for in terms of medical costs before the insurer begins to contribute. For example, if a health insurance policy has a deductible of $1,000, the insured must pay that amount for covered healthcare services before the insurance plan pays its share.

Understanding deductibles is especially important for policyholders as it affects their overall healthcare expenses and the planning of their finances, particularly when they anticipate needing medical services in a given year. It's a key factor that influences decisions regarding which insurance plan to choose based on individual health needs and financial situations.