Insurance deductibles are what you pay before insurance kicks in. Higher deductibles lower the policy’s total cost.
Updated Mar 9, 2023 · 3 min read Written by Doug Sibor Doug Sibor
Adobe, Day Pitney LLP, Complex Media
Doug Sibor is a former insurance writer for NerdWallet. He holds a bachelor's degree in English and Classics from Colby College and an MBA in finance from Boston University. His work has appeared in The New York Times and The Washington Post.
Assigning Editor Lisa GreenLisa Green leads the life insurance team and oversees insurance-focused data journalism at NerdWallet. A professional journalist since high school, she was an insurance writer at NerdWallet before becoming an assigning editor. Previously, Lisa spent more than 20 years as an editor at The Tennessean in Nashville, where she led business and consumer coverage for several years. At The Tennessean, she was part of a 2011 Pulitzer Prize finalist team for coverage of devastating floods in Middle Tennessee. Her work has also won awards from the Society for Advancing Business Editing and Writing, Investigative Reporters and Editors, and the Society of Professional Journalists. Lisa is an alumna of the Wharton Seminars for Business Journalists at the University of Pennsylvania. She has also studied data journalism with the National Institute for Computer-Assisted Reporting, business editing with the American Press Institute and writing, editing and news research with the Poynter Institute. In addition to her work at NerdWallet, Lisa is a real estate investor and has taught a seminar on how to earn college scholarships. She is based in Nashville.
Fact Checked
Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.
You never want to have to make an insurance claim, but if you do, you’ll at least get reimbursed for every penny you had to spend, right?
Before your insurance company pays you anything, it’s going to subtract your insurance deductible, meaning that some money will likely come out of your pocket.
But there are opportunities to save money if you understand how insurance deductibles work. Here’s what you need to know.
When you make a claim, your insurance deductible is the amount you have to cover yourself before your insurance company will chip in.
Insurance deductible amounts are typically written into your policy in one of two ways:
As a specific dollar amount. As a percentage of the policy’s total insurance amount.Different types of insurance apply these deductibles in different ways. With homeowners and car insurance policies, for example, you’ll pay a separate deductible for each individual claim. With health insurance, on the other hand, one deductible covers all claims within a calendar year.
Regardless of how the deductible is applied, your insurance will start to contribute once you reach your deductible.
With most coverages you can adjust your deductible, making it a valuable money-saving tool. For example, an insurance company will lower your overall premium if you carry a higher deductible, because you’re taking on more of the risk.
If you don’t have a claim, you can end up saving money every month. The risk is that if you do have to make a claim, you might have significant out-of-pocket expenses. So it’s critical to choose a deductible that you know you could afford to pay.
Deductibles are a nearly unavoidable part of most types of insurance. Policies without deductibles do exist, but they typically carry very high premiums.
Although there are cases where a deductible doesn’t apply — for example, auto liability coverage — most situations will require you to pay something before your insurance company will cover the rest.
Your health insurance deductible is what you pay for covered services before your plan begins paying.
It’s important to remember that reaching your annual deductible often doesn't mean the end of your out-of-pocket expenses. You're still responsible for any required health insurance copayments or coinsurance on covered services. However, most plans have an out-of-pocket limit that caps how much you have to pay for medical expenses before all costs are fully covered.
Family plans often have separate, smaller deductibles for individual family members and a larger, combined deductible for the entire family. With these plans, insurance begins to pay for covered claims in these scenarios:
An individual meets his or her own deductible. In this instance, only that individual has their expenses covered.
The combined expenses of the entire family meet the family deductible. At this point, every family member is fully covered regardless of whether they've reached their individual deductibles.
Only certain parts of your auto insurance carry a deductible at all. Liability car insurance , for instance, doesn’t require a deductible; however, liability coverage pays for only the damage you cause to others, not the damage to you or your own car. Depending on your state, other coverages may also be available without a deductible.
Once you file a claim, your insurer will determine the covered amount, subtract your deductible and provide the difference. The same process repeats for each new claim, so you pay the deductible every time.
Different types of coverage — such as comprehensive or collision insurance — each carry their own deductible. The higher the deductible you choose, the lower your monthly premium will be.
Some insurers offer a “disappearing” or “vanishing” car insurance deductible program, which reduces your deductible by a set amount each year you don’t have a claim.
Some insurers offer a “disappearing” or “vanishing” car insurance deductible program, which reduces your deductible by a set amount each year you don’t have a claim.
Depending on the deductible you choose, the stakes can be very high when it comes to homeowners insurance. To learn more, see our complete guide to homeowners insurance deductibles .
Because your policy covers only you and your belongings, not the physical structure of the building, renters insurance deductibles are always flat dollar amounts. In certain instances, such as specific valuable items you've added to your policy or liability claims against you, no deductible applies.
Renters insurance quotes tend to be lower than homeowners and thus result in cheaper monthly premiums, so raising your deductible may not have the same impact on your overall savings as it does with other coverages.
This one is pretty simple: Life insurance policies don't have deductibles. When there's a “claim” on someone's policy (that is, the insured person dies), the life insurance beneficiary receives the full benefits with no deductible taken out.
Popular carriers such as T-Mobile, AT&T and Verizon offer cell phone insurance plans that carry a deductible for every eligible claim. The insurance comes from a third party, and if you prefer, you can buy it directly from the provider rather than through your carrier.
Depending on the provider you choose and what type of phone you have, the deductible generally costscost from $50 to 200.
Although long-term care insurance doesn’t have a deductible, it does have an “elimination period” that works like a deductible. The elimination period requires the policyholder to pay for care for a certain period of time, such as 90 days, before the policy begins to pay out.
Pet insurance policies typically carry annual deductibles, which can range from $0 to $1,000 or more. As with other types of insurance, carrying a very low (or no) deductible will result in higher premiums.
Some insurers have deductibles based on a pet's ongoing condition rather than the coverage year, so that once you reach the deductible for the condition, it won’t reset regardless of the year you make a claim.
Travel insurance is often sold as a package that covers several possible predicaments, such as trip cancellation, loss of your baggage and emergency medical treatment. Deductibles can vary widely.
As with other types of insurance, increasing your travel insurance deductible will lower the overall cost of the policy.
About the authorYou’re following Doug Sibor
Visit your My NerdWallet Settings page to see all the writers you're following.
Doug Sibor is a former insurance writer for NerdWallet. He holds a bachelor's degree in English and Classics from Colby College and an MBA in finance from Boston University. His work has appeared in The New York Times and The Washington Post. See full bio.
On a similar note.
Switching your insurance could save you hundreds a year.
Link your auto or property policy to our new insurance assistant and we'll tell you if you could save money. It's just one more reason to join NerdWallet+ for $49/year.
LEARN MORE NerdWallet Home Page Finance Smarter Credit Cards Financial Planning Financial News Small BusinessDownload the app
Disclaimer: NerdWallet strives to keep its information accurate and up to date. This information may be different than what you see when you visit a financial institution, service provider or specific product’s site. All financial products, shopping products and services are presented without warranty. When evaluating offers, please review the financial institution’s Terms and Conditions. Pre-qualified offers are not binding. If you find discrepancies with your credit score or information from your credit report, please contact TransUnion® directly.
NerdUp by NerdWallet credit card: NerdWallet is not a bank. Bank services provided by Evolve Bank & Trust, member FDIC. The NerdUp by NerdWallet Credit Card is issued by Evolve Bank & Trust pursuant to a license from MasterCard International Inc.
Impact on your credit may vary, as credit scores are independently determined by credit bureaus based on a number of factors including the financial decisions you make with other financial services organizations.
NerdWallet Compare, Inc. NMLS ID# 1617539
California: California Finance Lender loans arranged pursuant to Department of Financial Protection and Innovation Finance Lenders License #60DBO-74812
Insurance Services offered through NerdWallet Insurance Services, Inc. (CA resident license no.OK92033) Insurance Licenses
NerdWallet™ | 55 Hawthorne St. - 10th Floor, San Francisco, CA 94105
