Your insurance deductible is the amount you pay out of pocket before your insurance coverage kicks in. Choosing the right deductible is one of the most important decisions you'll make when selecting a policy.
How Deductibles Work
When you file a claim, you pay the deductible amount first, and your insurance covers the rest (up to policy limits). For example, if you have a $1,000 deductible and $5,000 in damage, you pay $1,000 and insurance pays $4,000.
Types of Deductibles
Per-occurrence deductible: You pay the deductible each time you file a claim. Common in auto and home insurance.
Annual deductible: You pay the deductible once per year, then insurance covers additional claims. Standard in health insurance.
Percentage deductible: Based on a percentage of your home's insured value. Common for hurricane and earthquake coverage.
The Deductible-Premium Tradeoff
Higher deductible = Lower monthly premium
Lower deductible = Higher monthly premium
The sweet spot depends on your financial situation. If you can comfortably afford a $2,000 emergency expense, a higher deductible saves you money in the long run.
Tips for Choosing Your Deductible
- Build an emergency fund first — your deductible amount should be money you can access quickly
- Calculate the premium savings — sometimes doubling your deductible only saves $10/month
- Consider your claims history — if you rarely file claims, a higher deductible makes financial sense
- Match to the asset value — a $1,000 deductible on a $3,000 car doesn't make much sense
E
Ensureing Team
2026-03-20
