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 health, auto, and homeowners insurance, and they play a key role in how much you pay when something unexpected happens.

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 insurer 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?

In insurance, a deductible is a form of cost-sharing. It’s the amount you agree to pay before your insurance company begins contributing toward a claim. Deductibles help reduce small or frequent claims, which in turn helps keep insurance premiums more affordable.

Once your deductible is met, your insurance carrierpays 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

Different types of insurance apply deductibles in different ways. Understanding these variations helps you prepare for costs when filing a claim.

Health insurance deductible

A health insurance deductible is the amount you pay for medical services before your plan starts to share the cost. For example, if your deductible is $2,000, you’ll need to pay that amount for eligible healthcare expenses before your insurance pays a portion of the bills. After the deductible is met, you may still pay copayments or coinsurance until you reach your out-of-pocket maximum.

Some health plans have separate deductibles for in-network and out-of-network services. It’s important to understand your specific plan rules, including whether your deductible resets each year and which services count toward it.

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. If you file a claim, you’re responsible for paying your homeowners insurance deductible before the insurance carrier reimburses the rest. Some policies have special deductibles for wind or hail damage.

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 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.

What’s the difference between deductible and copay?

A copayment is a fixed amount — like $20 or $50 — that you pay for specific services, such as office visits or prescriptions. Copays usually apply even before your deductible is met, depending on your plan.

Coinsurance, another related term, is the percentage you pay for services after you’ve met your deductible. For example, you might pay 20% of costs and your carrier covers the other 80%.

Understanding the difference between deductible and copay helps you budget more accurately for medical expenses.

Deductibles and the insurance claims process

Your deductible plays a direct role in the insurance claims process. When you file a claim — whether it’s for a home repair, car damage, or medical treatment — 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 health insurance, 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.

Final thoughts

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 health bill, 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.