Full definition
A deductible is the fixed dollar amount you agree to pay toward a covered claim before your insurance company pays the rest. For example, if you have a $1,000 deductible and file a claim for $3,500 in damage, you pay $1,000 and your insurer pays $2,500. Higher deductibles lower your premium; lower deductibles raise it.
Real-world example
Your car is damaged in a hail storm. Repair cost: $2,200. Your deductible: $500. You pay $500. Your insurer pays $1,700.
Quick summary
The amount you pay out of pocket before insurance kicks in.
Related terms
- Premium
The amount you pay for your insurance policy, usually monthly or annually.
- Out-of-pocket maximum
The most you'll pay in a year before insurance covers 100% of costs.