What does the allowed amount in an insurance contract mean?

The allowed amount is the amount that the insurer will pay for particular service. In the context of health insurance, for example, it is the amount that the insurer will pay for each covered procedure.

The allowed amount is usually the amount the insurance provider deems the services received to be worth. This amount can also be set by provider contracts with the insurer. These are contracts where, for instance, an insurance company agrees to pay 80% of the standard rate of the provider. In most managed care arrangements, the provider agrees to accept that amount in full payment and not to bill the insured for the balance.