Deductible

A deductible is the amount of money you’re responsible for paying out of pocket before your insurance coverage starts to help with the cost of a claim. You’ll find deductibles in many types of insurance policies including auto and homeowners insurance and they play a key role in how much you pay toward a claim.

Let’s say you have a homeowners insurance deductible of $1,000. If a storm causes $7,000 in covered damage to your roof, you’ll pay the first $1,000 and your insurance company will pay the remaining $6,000 up to your policy limits.

Understanding your deductible and how it fits into your insurance policy terms can help you plan for out-of-pocket costs and choose coverage that fits your budget and comfort level with financial risk.

What is a deductible in insurance?

A deductible is a form of cost-sharing in an insurance policy. It’s the amount you agree to pay before your insurance company begins contributing toward a claim. This helps reduce small or frequent claims, which keeps premiums more affordable.

Once your deductible is met, your insurance carrier pays for covered losses up to the policy’s coverage limits. This setup applies across different types of policies from health plans to home and auto insurance.

Types of insurance deductibles

Not all deductibles work the same way across different types of insurance. Some apply per incident, while others reset annually. Knowing the difference can help you feel more prepared when it’s time to file a claim.

Auto insurance deductible

Your auto insurance deductible applies to collision and comprehensive coverage. If your car is damaged in a crash or due to theft, vandalism or weather, you’ll pay the deductible amount before your insurance kicks in to help with repairs or replacement. Liability coverage, which covers damage you cause to other people or their property, usually doesn’t have a deductible.

Many drivers choose a higher auto insurance deductible to lower their premium. But that also means you’ll pay more out of pocket if you need to file a claim.

Homeowners insurance deductible

In homeowners insurance, the deductible applies to damage caused by covered perils like fire, storms or theft. Some policies have special deductibles for wind or hail damage. If you file a claim, you’re responsible for paying your homeowners insurance deductible before the insurance carrier reimburses the rest. After you pay the deductible, your insurance company will cover the remaining costs up to your policy limit.

Home insurance deductibles may be flat dollar amounts or percentages of your total dwelling coverage. For example, a 2% deductible on a $300,000 home equals a $6,000 deductible for certain types of claims.

Choosing the right insurance deductible

Choosing the right home insurance deductible involves balancing out-of-pocket costs with monthly premiums. Higher deductibles typically result in lower insurance premiums because you’re agreeing to take on more risk. Lower deductibles lead to higher premiums but reduce the amount you’ll owe when filing a claim.

When choosing your deductible, consider:

• How much can I afford to pay out of pocket in an emergency?
• How often do I think I’ll file a claim?
• Does the premium savings from a higher deductible justify the increased risk?

If you have a strong emergency fund, a higher deductible may make sense. If you’d rather avoid a large bill after an accident or disaster, a lower deductible might be worth the higher premium.

Deductibles and the insurance claims process

When you file an insurance claim, your deductible directly affects your payout. It’s subtracted from the total amount your insurance company agrees to pay. That means the higher your deductible, the smaller your reimbursement.

Your deductible plays a direct role in the insurance claims process. When you file a claim whether it’s for a home repair or car damage, your insurance carrier will subtract the deductible from the total payout.

For example:

• You file a homeowners insurance claim for $15,000 in storm damage.
• Your policy has a $1,000 deductible.
• Your carrier approves the claim and pays you $14,000.

It’s a good idea to review your deductible details before you file a claim so you understand how much you’ll need to pay and whether filing is worth it.

Impact of deductible on insurance premiums

Another popular question is what’s the impact of deductible on insurance premiums? The general rule is simple: the higher the deductible, the lower your premium. This is true for auto insurance and homeowners insurance.

Why? Because by choosing a higher deductible, you’re agreeing to cover more of the risk. That means fewer, smaller claims for the insurance company to pay and that helps keep your monthly costs down.

Just make sure the deductible amount is realistic for your budget. Don’t choose a $2,000 deductible to save on premiums if you struggle to come up with that amount after an accident.

 

A deductible is one of the most important parts of your insurance policy. It affects both your out-of-pocket costs and your premium. Understanding how it works gives you more control over your coverage.

A deductible is a basic but important part of your insurance policy. It’s the amount you agree to pay before your insurance company steps in. Whether you’re dealing with a fender bender or damage to your home, your deductible is your share of the cost.

Choosing the right deductible is about knowing your finances, your comfort with risk and how often you’re likely to use your insurance. The goal is to find a balance that gives you peace of mind, protects you from large losses and keeps your premiums manageable.

At VIU by HUB, we’re here to help make that decision simpler. Whether you're comparing health plans, adjusting your auto insurance or reviewing your homeowners policy, we’ll walk you through your options and help you choose a deductible that makes sense for your life.