Definition - What does Carry-Over Provision mean?
A carry-over provision is a provision in an insurance contract that allows expenses incurred at the end of the year to be carried over and added to the deductible of the following policy year. This type of provision is sometimes found in certain health insurance policies, and in reinsurance policies. Some insurance policies offer carry-over credits as an incentive for prospective policyholders to go ahead and make the decision to buy the insurance policy.
A carry-over provision is also known as a deductible carry-over credit.
Insuranceopedia explains Carry-Over Provision
Carry-over provisions usually allow expenses made in the last three months of the policy year to carry over to the new year. The primary benefit of carry-over provisions is that they prevent the policyholder from having to start completely from scratch on paying the deductible at the beginning of the new year. So, for example, imagine that a health policy offers carry-over provisions, and that the deductible is $5,000. If the policyholder spent $2,000 in health care charges in December, then theses charges would carry over to the next year. This means that the policyholder would start off the year with $2,000 already contributed to the deductible, instead of zero.
Not all insurance policies offer carry-over provisions, and some insurers do not favor them because they can cost the insurer more money.
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