Definition Series for the Insurance Illiterate: Deductible

Deductible [dih-duhk-tuh-buh l]

Definition of Deductible

// the amount you agree to pay out of pocket for damage resulting from a specific loss or insured peril.

The things about an accident is that you never see it coming. Even a physic. When disaster happens, a deductible is your agreed upon amount of money that you yourself pay before the insurance company jumps in and covers the rest.


Ralph and his soon-to-be ex-girlfriend had an epic fight. He isn’t sure if she did this on purpose but, said ex-girlfriend turned the water tap on and left the house, resulting in $10,000 worth of water damage! He was in shock, and that’s the polite way of expressing his anger. His insurance company said his deductible was $2,500. So, what does this really mean?


Ouch. We won’t offer relationship advice (but you may want to dump her), however, we can help you out with an explanation. What this means is that you will first have to pay $2,500 out of your own pocket (this is your deductible). The Insurance company will then pay the remaining $7,500 of the $10,000 claim (ensuring it is within your policy limits and the peril is insured under your policy. Peril meaning water damage). With an agreed-upon amount, you’re not left guessing or gazing into your crystal ball for answers on how much you owe.

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November 2, 2020