Deductible

How it works

When you have a covered loss, the insurer typically figures out what the loss is worth, subtracts your deductible and pays the rest, up to your limit. If the whole loss is smaller than the deductible, the policy pays nothing.

Deductibles usually apply per claim or per occurrence, so two separate break-ins mean two deductibles. Some policies apply them differently. Garagekeepers, for example, often uses a deductible per car, so a storm that damages five customer cars can mean five deductibles. Business income coverage usually uses a waiting periodWaiting periodA waiting period is the stretch of time after a covered loss before coverage, such as business income, starts paying, working like a deductible measured in hours or days.Read the definition instead, a deductible measured in hours rather than dollars.

Your deductibles are listed on your declarations pageDeclarations pageThe declarations page is the summary at the front of an insurance policy listing who’s insured, what’s covered, the limits, deductibles, premium and policy dates.Read the definition, next to each coverage.

Choosing one

A higher deductible usually means a lower premiumPremiumA premium is the amount you pay an insurance company for a policy, usually set for a 12-month policy period and paid upfront or in installments.Read the definition, because you’re taking on more of each loss yourself. A lower deductible costs more up front but leaves you less to pay when something happens. The right choice depends on how much cash your business could pay out tomorrow without strain, and how often you expect small losses.

Where you’ll see it

Property, tools and equipment, garagekeepers and cyber policies all commonly carry deductibles, and you often get to choose the amount. The guide to choosing a deductible explains how to weigh the trade-off.