Deductible — Insurance Claims Definition
The amount the insured must pay out of pocket before the insurer pays on a covered claim, or the amount subtracted from each loss.
A deductible is the portion of a covered loss borne by the policyholder. It may apply per claim, per occurrence, or annually depending on the policy. Higher deductibles lower premium; lower deductibles increase premium.
In property claims, the insurer typically subtracts the deductible from the claim payment rather than billing separately. Wind/hail deductibles may be percentage-based in coastal areas.
Examples
A $10,000 covered loss with a $2,500 deductible yields a $7,500 payment. A 2% hurricane deductible on a $400,000 dwelling is $8,000 per storm.
Common Mistakes
Policyholders forget separate deductibles for wind/hail or earthquake. Assuming the deductible applies only once per year when the policy is per-claim causes surprises.
