Insurance is a bit like a gamble between you and the insurance company. The company bets that they’ll take in more money in premiums than they have to pay out in benefits, whether it’s for health insurance, auto insurance, life insurance or homeowners insurance. You’re paying a premium every month just in case something happens.

Health insurance is a contract between you and the insurance company that says that the insurance company will pay a portion of your medical expenses if you get sick or hurt and has to visit a doctor’s office or hospital. Some contracts also specify that the insurance company will pay a portion of your medical expenses to ensure you don’t get sick, such as paying for annual physicals or immunizations. However, the amount of your bill that the insurance company will pay, and under what circumstances they’ll pay it is known as coverage and can vary greatly from policy to policy.

The contract, or policy, spells out what the insurance company will pay for and how much of the bill you will have to pay. For example, the policy may cover an office visit, but you may have to pay a $20 co-payment. Or, the policy may not cover anything until you’ve paid an agreed upon amount out of your pocket, which is known as a deductible. These deductibles and copayments, along with any other non-reimbursable expense you may pay, is referred to as an out-of-pocket-expense. Other policies may have co-insurance, which is a percentage of the bill that you’re required to pay, which may be in addition to your deductible and co-payment. Often, the total amount of co-insurance you have to pay in a given policy is capped by the policy’s maximum. The policy will also state the amount you have to pay each month for the coverage, known as the premium, and the total amount the insurance company will pay out for the life of the policy, which is commonly referred to as a lifetime maximum.

Since a single hospital stay could wipe out your savings (and more), not many people can afford to go without some kind of health insurance — even if they’re healthy. Not only will health insurance protect you from bankruptcy in the event of a major medical event, it also gives you peace of mind.

Many plans pay 80 percent of the total doctor bill (physician charges) once you meet the deductible. That leaves 20 percent for you to pay, called the coinsurance.

Because costs for procedures vary among geographic areas, what your provider charges for a procedure may not be what your insurance company is willing to pay. The insurance company calls the amount they’re willing to pay the reasonable and customary charge. Also, not all services and procedures are covered. What the insurance company doesn’t pay is your responsibility.

So in addition to paying 20 percent of the total bill after the deductible is met, you’ll also be paying the differences between the reasonable and allowable charges. Here is an example: Your child has his tonsils taken out and the bill is $350. If you’ve met the deductible already, you should only have to pay 20 percent, or $70. But your insurance company says the maximum allowable charge for a tonsillectomy is $300, which means you really owe $110 (20 percent of $300 = $70, plus the extra $50 your doctor charged above what the insurance company will pay).

Some things that can help with deductibles and coinsurance are Healthcare Savings Accounts (HSA) or Flex Spending Accounts (FSA). While not a supplemental insurance, these accounts can be used along with your employer-sponsored health plan. An FSA or HSA is an account set up by an employer in which employees can automatically deposit a portion of their pre-tax paycheck into a tax-advantaged financial account that can be used to pay for qualified medical expenses not covered by insurance. These types of accounts can be beneficial to both employers and employees. Employers can tout an FSA or HSA as a great benefit in an effort to attract and keep employees, while both employer and employee can save money on payroll and social security taxes. In addition, if used correctly, an FSA or HSA can help to greatly offset an employee’s out-of-pocket medical expenses and help pay for the monthly health insurance premiums. Different types of FSAs can even be used to pay for an employee’s day-to-day expenses of caring for a dependent or to cover adoption expenses. The big downside to these accounts is that the money you don’t use in your health insurance year can’t be rolled over into next year’s FSA or HSA. So basically, if you don’t use it, you lose it.