Insurance term
Deductible
The share you pay per claim
Definition
The amount the policyholder covers before the insurer pays anything on a claim. Also called an excess in some markets.
In more detail
Deductibles apply per claim, not per policy year, unless the wording says otherwise. A household with several small claims can therefore pay the deductible more than once in a single year.
Policies sometimes stack a compulsory deductible set by the insurer with a voluntary one chosen by the policyholder in exchange for a lower premium. The claim is reduced by the combined figure.
Example
With a 500 deductible and a 2,000 loss, the insurer pays 1,500 provided the loss is covered and within the policy limit.
Frequently asked questions
Does a higher deductible always save money?
It lowers the premium, but it also raises the cost of every claim you make. The saving is only real if you can absorb the deductible comfortably when a loss occurs.
Glossary entries are general explanations, not advice. Where a term appears in a contract or policy, the definition in that document governs.