Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Former Farmers Insurance CSR

UPDATED: Oct 30, 2020

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A deductible is an amount specified in an insurance policy, by the insurance company, that the policyholder will need to pay themselves in the event that they make a claim against their insurance policy.

In many ways, a deductible is similar to the co-payment on health insurance but it is normally a fixed cost per claim rather than on a sliding scale as with health claims.

What kinds of deductibles are there for auto insurance?

deductibleYour policy may have a single deductible which is applied to every aspect of your insurance policy, so for example if your deductible is $500 and your claim is for $2,000 – the insurer would in these circumstances pay out $1,500 on your claim and you would make up the remaining $500 yourself.

It is also possible for an insurance policy to offer different deductible limits against different types of claim, often this is because in cases of very low risk but high potential cost the costs of insuring the full sum might be prohibitively expensive for the customer.

If you want to know exactly what deductibles are applied to your insurance policy you must read your insurance contract and if you still don’t understand what exactly you will need to pay you should contact your insurance agent or broker for an explanation, or the insurance company direct.

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Is it possible to raise or lower my deductible?

In many cases, it may be possible to raise your deductible, in order to reduce the cost of your insurance policy or alternatively to lower your deductibles by paying higher premiums.

However you need to be careful with this, if you lower your deductible too far you won’t be getting the best value for money as the cost of your insurance may outweigh any additional benefits (or even end up costing you more than those benefits) and you’d be best off saving a little each month to cover your deductible in the event of an accident.

Conversely, it’s also important not to raise your deductible so high that you can’t afford to pay it, if and when you make a claim. In the case of third party incidents, those parties will expect to be paid off immediately by you when the insurance provider makes its payment. And in the case of your own vehicle, you might not be able to get it back on the road if you can’t find the money to pay the deductible.

(To read more about deductibles outside of our glossary, please read our more detailed article on the subject.)

Additional Deductible Definitions