A deductible in insurance is the amount of money that the insured person must pay out of pocket before their insurance policy begins to pay for covered expenses. For example, if you have a health insurance policy with a $1,000 deductible and incur a $2,000 medical bill, you would pay the first $1,000, and the insurance would cover the remaining $1,000
. Deductibles serve as a way to share risk between the policyholder and the insurer and help deter frequent small claims. They can be a fixed dollar amount or a percentage of the insured value, depending on the policy type. For instance, homeowners insurance may have a percentage deductible based on the home's insured value, while auto insurance deductibles are usually a fixed amount per claim
. Choosing a higher deductible typically lowers your insurance premiums because you assume more financial responsibility in the event of a claim. Conversely, a lower deductible means higher premiums but less out-of-pocket expense when filing a claim
. Deductibles usually apply only to covered expenses and reset each policy period (often annually). Some policies may have different deductibles for different types of coverage (e.g., collision vs. comprehensive in auto insurance)
. In summary, a deductible is your initial financial contribution toward a covered loss, after which the insurance company pays the remaining eligible costs according to your policy terms
