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A deductible is a common term in the insurance industry that refers to the amount of money a policyholder must pay out of pocket before their insurance coverage begins. Deductibles are typically found in most types of insurance policies, including health insurance, auto insurance, and homeowners insurance.

The purpose of a deductible is to share the risk between the policyholder and the insurance company. By requiring policyholders to pay a portion of the claim, insurance companies are able to reduce their financial exposure and keep premiums affordable. Policyholders who choose a higher deductible will generally pay a lower premium, while those who choose a lower deductible will generally pay a higher premium.

The amount of the deductible varies depending on the insurance policy and the type of coverage. For example, health insurance deductibles can range from a few hundred dollars to several thousand dollars, while auto insurance deductibles are typically between $500 and $1,000. Homeowners insurance deductibles can also vary, but are typically between $500 and $2,000.

It is important to understand how deductibles work before purchasing an insurance policy. When you file a claim, the deductible is the amount you must pay before your insurance coverage kicks in. For example, if you have a $1,000 deductible on your auto insurance policy and you get into an accident that causes $5,000 in damage, you will be responsible for paying the first $1,000 out of pocket, and your insurance company will pay the remaining $4,000.

Once you meet your deductible, your insurance coverage will begin to pay for covered expenses up to the policy limit. For example, if you have a $100,000 limit on your homeowners insurance policy and your home is damaged by a covered peril such as a fire, your insurance company will pay for the repairs up to the limit of $100,000, less your deductible.

Deductibles can be either per occurrence or per year. A per occurrence deductible means that you must pay the deductible for each individual claim. For example, if you have a per occurrence deductible of $1,000 on your auto insurance policy and you get into two accidents in the same year, you will be responsible for paying $1,000 for each claim.

A per year deductible means that you only have to pay the deductible once per year, regardless of how many claims you file during that time. For example, if you have a per year deductible of $1,000 on your health insurance policy and you have three medical procedures that cost $500 each in a single year, you will only be responsible for paying the deductible once, and your insurance company will pay for the rest of the expenses.

It is important to note that not all expenses count towards your deductible. Insurance policies typically only cover certain types of expenses, and some expenses may be excluded from coverage altogether. For example, if you have a health insurance policy with a $1,000 deductible, but your policy only covers medical expenses related to certain conditions, you may not be able to count all of your medical expenses towards your deductible.

Additionally, some insurance policies have a separate deductible for certain types of coverage. For example, your auto insurance policy may have a separate deductible for collision and comprehensive coverage, which covers damage to your vehicle from accidents, theft, and other incidents. In this case, you would need to pay both deductibles if you file a claim for damage to your vehicle from an accident and theft.

1. What is a deductible? A deductible is a specified amount of money that must be paid by the policyholder before their insurance coverage starts.
2. How does a deductible work? If you have a deductible, you will be responsible for paying the amount of your deductible before your insurance company pays for any covered expenses.
3. What types of insurance policies have deductibles? Most types of insurance policies have deductibles, including health insurance, car insurance, and homeowners insurance.
4. Is a deductible a fixed amount? Yes, a deductible is typically a fixed amount that is outlined in your insurance policy.
5. Can a deductible vary based on the type of claim? Yes, some insurance policies may have different deductible amounts for different types of claims.
6. Are there any benefits to having a high deductible? Yes, having a higher deductible can often result in lower monthly premiums for your insurance policy.
7. Can you choose your deductible amount? In most cases, yes, you can choose your deductible amount when you purchase an insurance policy.
8. What happens if you don’t meet your deductible? If you don’t meet your deductible, you will be responsible for paying for any covered expenses until you reach your deductible amount.
9. Do deductibles reset each year? For most insurance policies, deductibles will reset at the beginning of each policy term or calendar year.
10. Can you use your deductible to pay for non-covered expenses? No, your deductible can only be used to pay for covered expenses as outlined in your insurance policy.