Deductible Definition & Meaning | Insurance Term | CSIMarket
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Glossary

Deductible

Insurance Term

A deductible is an amount of money that an individual or an insurer must pay before the insurance policy begins covering the expenses. Essentially, it*s the portion of the financial responsibility for a claim which the policy holder carries. Deductibles are commonly used in most types of insurance policies, and they are utilized as a means of sharing the risks associated with covered events.

The purpose of deductibles in the insurance industry is to reduce the number of small claims that an insurer has to handle, allowing them to concentrate their resources on more significant claims. In this way, policies with higher deductibles cost less in premium payments than policies with lower deductibles.

For instance, in an auto insurance policy, if an accident occurs, the policyholder will have to pay the predetermined deductible amount before the insurer begins paying. Suppose the policyholder has a $500 deductible and the accident*s repair cost is $5,000. In that case, the policyholder must pay the first $500 before the insurer pays the remaining $4,500.

Different types of insurance policies have varying deductible amounts, and they may be influenced by personal factors such as driving history, age, and the value of the property. As a consumer, it is essential to understand the deductibles in your policy and how they can affect your overall coverage. This knowledge can help you to identify the level of risk you are ready to take to reduce your insurance premiums.


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