What is 'Carryover Provision'

A carryover provision is an insurance policy clause that allows the policyholder to move claims from the end of one year to the beginning of the next year. Usually this provision only applies to losses sustained in the last three months of the year. 

BREAKING DOWN 'Carryover Provision'

Carryover provisions are commonly found in health insurance and related healthcare plans, and can be found in Flexible Spending Accounts (FSA) as well. The insured can benefit from having a carryover provision on a policy if the policyholder incurs a high number of claims in one year and have already met their deductible. This allows the policyholder to move additional claims that would have had no effect on this year’s deductible to next year to offset additional out of pocket costs. Carryover provisions are most commonly found on employee-sponsored plans, but can sometimes be optioned on individual plans as well. However, the cost of the additional rider may prove to be too much for individuals to carry on their own.

Deductibles are found on almost all insurance policies. The deductible is the amount of loss that the policyholder is responsible for before the insurance policy coverage kicks in. Deductibles can vary greatly between insurance policies, but generally policies with higher deductibles have lower monthly premiums, because an insurer is responsible for less of the insured’s over-all coverage.

A carryover provision is sometimes also known as a fourth-quarter deductible carryover.

An Example of a Carryover Provision

For example, Katie Jones has a stomach condition that causes her frequent trips to the emergency room. Her health insurance policy has a high deductible that must be met before the coverage takes effect and covers her health care costs. She takes out a policy with a carryover provision because she is familiar with having to pay a lot of her medical costs out of pocket and wants to lessen her individual outlay. Her deductible for this policy is $5,000. In 2017, she meets her deductible by March. She ends up filing several claims throughout the rest of the year, all of which are covered by her policy. As she nears the end of the calendar year, her carryover provision goes into effect. All the claims she files for the end of 2017 have now been applied to the start of 2018. Since she pays an additional $500 during that time, the money is applied towards the deductible for the following year.

By mid-January Katie is back in the hospital. Thanks to her policy’s carryover provision, she has already been able to apply $500 towards her $5,000 deductible and now only has $4,500 left until her deductible is met.

  1. Carryover Basis

    Carryover basis is a method for determining the tax basis of ...
  2. Aggregate Deductible

    Aggregate deductible is the limit deductible a policyholder would ...
  3. Deductible

    For taxes, a deductible is the expenses subtracted from adjusted ...
  4. Capital Loss Carryover

    Capital loss carryover is the amount of capital losses a person ...
  5. Automatic Premium Loan

    An automatic premium loan is a policy provision that lets the ...
  6. Corridor Deductible

    A corridor deductible is expenses paid by the insured in excess ...
Related Articles
  1. Taxes

    Why You Should Itemize Your Tax Deductions

    This strategy of moving your tax deductable payments and donations to the following year could mean hundreds more on your return.
  2. Taxes

    An Overview of Itemized Deductions

    Itemized deductions will mostly stay the same for 2017 tax year (medical deductions improve under the new tax bill). Big changes start in 2018.
  3. Insurance

    Don't Overpay for Health Insurance This Year

    Health insurance open enrollment starts Nov. 1. Choosing the right ACA plan (or plan at work) takes figuring out how often you actually go to the doctor.
  4. Personal Finance

    11 Tax Deductions You Can't Actually Write Off

    These are some of the most common tax write-offs that you can't really claim.
  5. Tech

    Tax Tips for Deducting Investment Management Fees

    Investment expenses can be deducted from your taxes when three main criteria are met. Here's how they work to help you maximize your tax deduction.
  6. Taxes

    9 Ways the New Tax Law Affects Millennials

    The new tax bill, the Tax Cuts and Jobs Act, includes some important changes for Millennials.
  7. Insurance

    Dividend-Paying Whole Life Insurance: What to Know

    Many whole life insurance policies pay dividends. Here are what policyholders need to consider.
  8. Taxes

    Who Loses Under the New Tax Provisions? Homeowners

    The tax code overhaul reduces the tax advantages of owning a home.
  9. Insurance

    Is Loan Protection Insurance Right For You?

    Loan protection insurance can keep you from defaulting on your loans when you're in financial trouble, but it's not for everyone. Learn more on how it can help you.
  10. Small Business

    Writing Off the Expenses of Starting Your Own Business

    Learn how to navigate the complicated rules for writing off the expenses of starting your own business. It could save you a lot of money.
  1. When is mortgage insurance tax deductible?

    Homeowners who took out or refinanced a mortgage after Jan. 1, 2007, may qualify for the PMI deduction, depending on their ... Read Answer >>
Trading Center