Basics
What Is a Deductible?
A deductible is the amount you typically pay toward a covered claim before insurance begins to pay. Learn how deductibles work for auto, home, renters and health coverage.
By InsureGuide Editorial Team. Published March 12, 2026. Updated August 4, 2026.
A deductible is one of the most important numbers on an insurance policy. It is usually the amount you pay out of pocket toward a covered loss before the insurer pays the rest, up to policy limits and subject to the policy’s terms.
The basic idea
Think of a deductible as the first layer of a covered claim that you retain. If your auto collision deductible is $1,000 and a covered repair costs $4,200, you would typically pay $1,000 and the insurer may pay the remaining $3,200, minus any other adjustments in the policy.
Deductibles encourage policyholders to share some risk. A higher deductible often comes with a lower premium, and a lower deductible often comes with a higher premium. That tradeoff is not guaranteed and depends on the insurer, the coverage, and your risk profile.
How deductibles differ by insurance type
Auto, homeowners, renters and health insurance all use deductibles, but they are not identical.
- Auto: Collision and comprehensive coverages usually have deductibles. Liability coverage typically does not.
- Home and renters: Many property claims are subject to a deductible. Some perils, such as wind or hurricane in certain coastal states, may use a separate percentage deductible.
- Health: You generally pay covered medical costs until you meet the plan deductible, then coinsurance or copays may apply until you reach the out-of-pocket maximum.
Percentage deductibles
Some homeowners policies, especially in catastrophe-prone regions, use a percentage deductible based on dwelling coverage. A 2% deductible on $400,000 of dwelling coverage is $8,000. Percentage deductibles are state- and policy-specific. Confirm the wording in the declarations page rather than assuming a flat dollar amount.
What a deductible is not
A deductible is not a premium, a copay, or a coverage limit. It is also not a refund. Unused deductibles do not accumulate like a savings account. If a claim is denied because of an exclusion, the deductible does not make the loss covered.