A deductible is a specified amount of money that the insured must pay out of pocket before an insurance company will pay any expenses. In the context of an insurance policy, the deductible is the amount that the policyholder is responsible for paying toward an insured loss. When a claim is made, the deductible is subtracted from the amount the insurance company is obligated to pay to the policyholder or a third-party claimant.
The purpose of a deductible is to share the risk between the insurer and the insured and to discourage the filing of small claims. Deductibles can apply per-policy or per-claim depending on the insurer and the type of policy. Policies with higher deductibles typically have lower premiums because the policyholder assumes more of the risk, which reduces the financial risk for the insurer. Deductibles are commonly found in many types of insurance policies, including health, auto, and homeowners insurance.