Corridor Deductible

A corridor deductible is expenses 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 bridge the gap between policies that reach the aggregate limit of coverage and any additional coverage that may be in effect.

Corridor deductibles are most commonly found in health and medical insurance plans, specifically those that have co-insurance features. The corridor deductible is usually a fixed dollar amount per loss and applies in the transitional area between basic coverage and major medical expense coverage. Basic policy benefits are paid first, and when the basic policy benefits are exhausted, the corridor deductible then applies. After the corridor deductible is paid, the major medical plan benefits come into effect.

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.

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 these policies 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.

A corridor deductible most often applies in situations where a supplemental major medical insurance policy is in effect. Like most comprehensive major medical health insurance plans, a supplemental policy is likely to include a stop-loss limit and a maximum lifetime benefit limit.

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 percent of any further expenses, up to the stop-loss limit.