Carry-Over Provision
What Does Carry-Over Provision Mean?
A carry-over provision is a clause in an insurance contract that allows expenses incurred at the end of one year to be carried over and applied to the deductible of the following policy year. This provision is often found in certain health insurance and reinsurance policies. Some policies also offer carry-over credits as an incentive for potential policyholders to purchase the insurance.
A carry-over provision is also referred to as a deductible carry-over credit.
Insuranceopedia Explains Carry-Over Provision
Carry-over provisions typically allow expenses incurred in the last three months of the policy year to be applied to the new year’s deductible. The main benefit of these provisions is that they prevent the policyholder from starting completely from scratch on paying the deductible at the beginning of the new year. For example, if a health policy has a $5,000 deductible and the policyholder incurs $2,000 in healthcare charges in December, those charges would carry over to the next year. This means the policyholder would start the new year with $2,000 already applied toward the deductible, rather than starting from zero.
However, not all insurance policies offer carry-over provisions, and some insurers may avoid them because they can lead to higher costs for the insurer.
