How does an insurance deductible work?

A deductible is the part of a covered loss you pay yourself before the insurance company pays the rest. A higher deductible lowers your premium, so pick the highest one you could pay in cash tomorrow.

What a deductible does

It is the first slice of a covered loss that you pay. The insurer pays the rest, up to your coverage limit. If the loss is smaller than your deductible, the insurer pays nothing.

Car and home deductibles apply per claim

On car, renters and homeowners policies, you usually pay the deductible each time you file a claim. Two accidents in one year can mean two deductibles.

Health deductibles reset each year

A health plan deductible is a yearly total. Once you have paid it, you usually owe only copays or coinsurance until your out-of-pocket maximum, which is capped at $10,600 for one person on a Marketplace plan in 2026.

The trade-off

Raising a deductible lowers your premium. The right level is the highest amount you could pay in cash without new debt.

How a deductible works on a claim

Say a storm cracks your windshield and the repair costs $900. With a $500 comprehensive deductible, you pay $500 and the insurer pays $400. With a $1,000 deductible, you pay the whole $900 and there is no point filing a claim.

In most car and property policies, the insurer subtracts your deductible from the check it sends you or the repair shop. You don't mail the deductible to the insurer. You pay it to the shop, or simply receive less.

Car insurance deductibles

Car policies usually put deductibles on collision (damage to your car from a crash) and comprehensive (theft, weather, hitting a deer). Common choices are $250, $500 and $1,000. Liability coverage, which pays for damage you cause to others, usually has no deductible.

Regulators at the National Association of Insurance Commissioners note that raising your collision and comprehensive deductibles is one way to lower your premium. If your car is old and worth little, you might drop that coverage entirely, unless a lender requires it.

Renters and homeowners deductibles

Renters insurance often has a deductible of $500 or $1,000. If someone steals a $1,400 laptop and your deductible is $500, the claim pays about $900, depending on whether your policy pays replacement cost or actual cash value.

Homeowners policies can have a flat deductible or a percentage of the home's insured value. A 2% deductible on a home insured for $300,000 is $300,000 × 0.02 = $6,000. Some areas have separate wind, hurricane or earthquake deductibles, so check your declarations page.

Health insurance deductibles

A health plan deductible works by year, not by claim. You pay covered costs until you reach it, then the plan shares costs through coinsurance. Many preventive services are covered at no cost even before you meet the deductible.

Family plans usually have two deductibles: one per person and a larger one for the whole family. On the Marketplace, Bronze plans tend to have high deductibles and low premiums, and Gold and Platinum plans the opposite. A high-deductible plan with a deductible of at least $1,700 for one person in 2026 can make you eligible for an HSA.

How to choose your deductible

Start with your emergency fund. Any deductible you choose should be money you could hand over tomorrow. If your fund is $600, a $1,000 deductible would push part of a claim onto a credit card.

Then compare quotes. Ask the insurer for the premium at two or three deductible levels. Divide the extra deductible by the yearly savings to get your break-even: the number of claim-free years it takes for the savings to cover the bigger deductible. Under 3 years is a good trade for most people who rarely file claims.