Business News Select | SMPost | Terms

Term: Corridor Deductible

29 May 2015

DEFINITION of ‘Corridor Deductible’
Expenses that are paid by the insured in excess of an insurance policy’s coverage limit, but below the threshold at which additional coverage options are available. Corridor deductibles are most commonly found in health and medical insurance plans, specifically those that have co-insurance features.

INVESTOPEDIA EXPLAINS ‘Corridor Deductible’
Individuals are often presented with a wide variety of options when purchasing health insurance policies, especially when it comes to deductibles and coverage limits. Policies with low deductibles keep the insured from having to pay as much out of pocket before the insurance plan coverage begins to pay costs, but may cost more than policies with higher deductibles. Having a high coverage limit allows the insured to have more of the total cost of procedures and care paid for by the insurer, but are also likely to cost more than policies with lower limits.

Corridor deductibles bridge the gap between policies that reach the aggregate limit of coverage and any additional coverage that may be offered. Costs above the aggregate limit and above the corridor deductible may be shared by the insured and insurer through a cost-sharing arrangement. Policies may have an initial deductible that is paid by the insured, a first benefit level that is paid by the insurer, a corridor deductible paid by the insured, and a secondary benefit level with costs shared by both the insured and insurer.

For example, a health insurance policy may require the insured to pay a $250 deductible before coverage begins. Once the first deductible is paid the insurer is responsible for up to $1,500 of medical expenses. Once this limit is reached the insured is then responsible for a corridor deductible of $2,000 before any further benefits apply. Any benefits after the corridor deductible are shared by the insured and the insurer, with the insurer paying 80% of any further expenses.

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