What defines a deductible in health insurance?

A deductible in health insurance refers to the specific amount of money that a policyholder must pay out-of-pocket for healthcare services before the insurance coverage kicks in. This amount is crucial because it dictates when the insurance provider will start to share the costs of covered services. For instance, if an individual's deductible is set at $1,000, they would need to pay for the first $1,000 of their medical expenses themselves. After this threshold is met, the insurance company typically begins to pay a portion of further costs, which aligns with the insured's policy terms.

The other options do not accurately define a deductible. The total annual cost of a health plan pertains to the premium and other associated costs but does not specifically refer to the deductible. The percentage of costs covered by insurance relates to co-insurance or co-payments, not to the deductible itself, while the maximum limit of policy coverage refers to the overall cap on benefits provided by the insurance, distinct from the deductible concept. Understanding the role of the deductible is vital for individuals to manage their healthcare expenses and insurance benefits effectively.