A deductible is the amount of money you have to pay yourself before your insurance starts paying for covered costs.

Simple definition

  • In insurance, a deductible is the out-of-pocket amount taken off the top of a claim that you must cover first.
  • After you’ve paid your deductible, the insurer pays some or all of the remaining covered expenses, depending on the policy.

Quick example

  • If your car insurance has a 500 deductible and you have 2,000 in covered damage, you pay 500 and the insurer pays 1,500.
  • With health insurance, you might have a 1,000 yearly deductible; once you’ve spent that on covered care, your plan starts sharing costs for the rest of the year.

Why deductibles exist

  • Deductibles share risk between you and the insurer, so you don’t claim for every tiny expense.
  • Higher deductibles usually mean lower monthly premiums; lower deductibles mean higher premiums but less to pay when something happens.

Key points to remember

  • Deductibles can be a fixed dollar amount or a percentage, depending on the policy (auto, home, health, etc.).
  • They can apply per incident (like many auto or home claims) or per year (common in health insurance).

Information gathered from public forums or data available on the internet and portrayed here.