What is a deductible?

A deductible is a certain amount of money you pay out-of-pocket when you have insurance coverage. A deductible can be either a specific dollar amount or a percentage of an insurance policy’s total amount; percentage deductibles usually apply only to homeowners insurance policies and are calculated based upon a percentage of the home’s insured value. Once you pay out that amount, or reach your deductible, your insurance kicks in and begins to cover the remainder of your costs. Understanding the essential role of deductibles in an insurance contract is an important part of getting the biggest recovery possible out of your business, auto or homeowners policy.

A deductible is also an important aspect of health care costs. There are some expenses, such as yearly physicals and other types of preventative care, that may not require a deductible. If the deductible in your plan is high, your premiums might be lower. If the premiums are high, the deductible is typically lower. In most cases, a policyholder with dependents will have an individual deductible for each member of the family and possibly a family deductible as well.

Learn more about deductibles

When do I need to be aware of a deductible?

Anyone who holds an insurance policy should understand a deductible. When you visit the doctor for an illness, you’ll most likely pay a certain percentage, which is the deductible. When you get a rotten tooth pulled, you’ll most likely pay the deductible. When you get your car fixed after an accident, you’ll probably pay a deductible for a portion of the repair costs.

What is important to know about deductibles?

Deductibles are a part of most insurance policies, including health, auto, and homeowners insurance. There are some things you should know about how to best utilize your deductible and insurance policy:

Whether you have a dollar amount deductible or the deductible is a percentage of your insurance policy’s total amount, it comes off the top of any claim payment.
You might need to have a referral to see certain providers when it comes to health or auto insurance, otherwise you might not have coverage and your deductible will turn into your first payment of many.
When preventative care doesn’t apply to the deductible on a health insurance policy, it may still require a copay which you would be required to pay at the time of service.
When a family has one health plan, the deductible for the entire family would be larger than each individual deductible amount.
A deductible under a health insurance policy is a yearly amount (except in transactions involving a multi-year insurance policies), so you would continue to pay towards it each year until you reach the determined amount.
A deductible generally applies each time you file a claim on an auto insurance or homeowners insurance policy, and applies only to property damage and not to the liability portion of these policies.