What is an insurance deductible?

By Allstate

Last updated: April 2022

Deductible defined

A deductible is the amount of money you pay out of your own pocket toward a covered claim. It is a key feature of many types of insurance coverage. You'll typically find deductibles for certain coverages in homeowners, renters and auto insurance policies.

A policy may have multiple deductibles. For example, if your car insurance policy has comprehensive coverage and collision coverage, you likely have a comprehensive deductible and a separate collision deductible.

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How does a deductible work?

Let’s say the collision coverage on your car insurance policy has a $500 deductible. You damage your car in a covered accident. It costs $3,000 to repair. You’d pay $500 toward repairs, and your insurer would cover the remaining $2,500.

Unlike health insurance, which typically has one deductible to meet each year, the deductible on an auto or homeowners insurance policy’s coverage will apply each time you file a claim.

How is a deductible determined?

Insurers offer a range of deductibles, and you can typically choose the deductible that fits your needs. According to the Insurance Information Institute (III), common deductible amounts for home and auto insurance coverages are $500 and $1,000 — but amounts vary among insurers and policies.

Does a deductible affect the cost of insurance?

Your deductible typically affects your premium, or the cost you pay for your policy. The higher your deductible, the lower your premium will likely be. The reason is, with a higher deductible, you’re taking greater responsibility for the expenses of a claim.

Your insurance provider can help you find the right balance of deductibles and premium costs for your budget.