what is insurance deductible

Insurance Deductible Defined

An insurance deductible is the amount of money you, the policy holder, have to pay for services or benefits covered by your insurance policy before your insurance company will help pay for those types of services. Once you’ve paid the deductible, your insurer pays for covered services, up to the plan limit. However, some services might be covered by insurance outside of the deductible amount. Lastly, the deductible may apply on an annual or per incident basis, depending on the type of policy you have.

Insurance deductibles have been part of insurance contracts for years. When you sign up for a plan, you agree to pay a certain amount before the provider pays. It's the amount of money that you pay when you make a claim. Often, it is stated as a dollar amount.

What happens when the claim amount is less than the Deductible?

If the claim amount is less than the deductible mentioned in the policy, then the claim will not be admissible. This implies that the role of the insurer will not come into the picture when the claim amount is less than the deductible.

Another angle to the substance is that you should be aware of your policy and deductible which indicates the money you will have to bear at the time of claim.

How Does a Deductible Work?

A deductible basically works like this: Let’s say you have a $500 deductible on your car insurance. You get into a minor scrape and need to make a claim with your insurance company.

The company approves your claim, which is for $2,000 worth of repairs. It’s your responsibility to pay $500 toward repairs because that’s your policy’s deductible. The insurance company will cover the rest - in this case, $1,500.

Can one insurance policy have multiple deductible types?

Yes. For example, commercial property insurance might use one of three different forms of deductibles:

1. Flat deductible: A fixed dollar amount applied to each loss

2. Percentage deductible: A percentage applied to a property’s total value, often in cases of catastrophe damage

3. Waiting-period deductible: A certain period of time a business must be shut down before qualifying for payments under its business interruption endorsement

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