Insurance

• Insurance is an agreement between a policyholder and an insurer. The policyholder agrees to pay the insurer a set amount of money. In exchange, the insurer agrees to pay the policyholder a larger amount of money if a specific event happens.
  
  

Health

• Health insurance pays the policyholder when he or other people named in his policy receives medical treatment. This is intended to help the policyholder afford the high cost of medical care. Other kinds of insurance include auto accident, life and liability.
  
  

High-Deductible

• A deductible is a sum of money a policyholder must pay out of pocket before the insurance policy pays out. For example, a policy might have a $500 deductible. If the policyholder incurred $2,000 in medical expenses, the policyholder would pay $500 and the insurer would pay the remaining $1,500. The deductible applies to each event, though most policies also have a listed "maximum annual out of pocket expense" after which the insurer covers all expenses through the end of the year.
  
  High-deductible insurance policies have high deductibles per event and high maximum annual out of pocket limits. The deductible typically runs between $500 and $1000 with the maximum in the $3,000 to $10,000 range.
  
  

Individual

• Insurance policies can be purchased by individuals acting alone, or by groups negotiating together. Health insurance available through your employer is an example of group insurance. Individual insurance is purchased by negotiating directly with a health insurance company. In most cases, individual insurance is more expensive than group insurance.
  
  

Advantages

• The main advantage of individual high deductible health insurance is its premium cost. The premium--the money you pay the insurer--is lower for high deductible insurance than for low deductible policies. This can help to defray the extra expense of buying the insurance on your own rather than through group negotiation.
  
  

Disadvantages

• High-deductible insurance carries higher out of pocket expenses with each medical event. This means you might spend much more money in the long run if you have a serious accident or illness. This can also lead to people being less likely to go in for checkups and preventative appointments, which can lead to medical problems later on.
  
  

Health Savings Accounts

• A health savings account or flexible spending account is often paired with high-deductible health insurance. An HSA/FSA allows you to save pre-tax money in an account expressly for medical and other health related expenses. Saving money in this account can help make sure the high deductible isn't a hardship. A common strategy is to make a monthly deposit into an HSA equal to how much less your high deductible policy cost than a comparable low deductible policy.