Key Takeaways
- An insurance deductible is the amount you pay out of pocket before your insurance covers the rest of a claim.
- Deductibles help share risk, discourage small or fraudulent claims, and can lower insurance premiums.
- Common types include collision, comprehensive, standard, and zero-deductible options.
- In some cases—like when another party is at fault—you may not need to pay a deductible.
- Higher deductibles typically reduce your monthly premiums but increase your upfront costs.
- Speak with a Morison Insurance broker to choose the right deductible based on your budget and risk tolerance.
What Is an Insurance Deductible?
An insurance deductible is the amount you are responsible for paying before your insurer covers the remaining cost of a claim. This applies to home insurance, car insurance, business insurance, and other policy types.
Depending on your policy, the deductible may be:
- A fixed dollar amount (e.g., $500, $1,000)
- A percentage of the claim (common in certain high-value property policies)
Example
If your deductible is $1,000 and you file a claim for $5,000 in damages, you would pay $1,000 and your insurer would pay the remaining $4,000.
Why Do Insurance Policies Include Deductibles?
Insurance deductibles exist for several important reasons:
- Share risk between the policyholder and the insurer
- Reduce small claims and associated administrative costs
- Discourage fraudulent or unnecessary claims
- Promote responsible behavior and reduce reckless activity
- Lower your insurance premiums—higher deductibles usually equal lower premiums
Deductibles make insurance more sustainable and ensure that it’s used primarily for significant or unexpected losses.
Types of Insurance Deductibles
The deductible you pay depends on the type of insurance and the event triggering the claim. Below are common deductible types:
Auto Insurance Deductibles
- Collision Deductible: Applies when your car is damaged in a crash. You pay based on your level of fault.
- Comprehensive Deductible: Covers non-collision events like theft, vandalism, or weather damage.
- DCPD (Direct Compensation Property Damage): Usually no deductible if you're not at fault, but optional deductibles may apply.
- All Perils Deductible: A single deductible that combines collision and comprehensive coverage.
- Specified Perils Deductible: Applies only to named risks (e.g., fire, theft).
- Zero Deductible: Some policies allow you to pay nothing out of pocket—typically at a higher premium.
Home & Property Insurance Deductibles
- Standard Deductible: A flat amount you pay for covered risks like fire, theft, or storm damage.
- Special Deductibles: Higher deductibles that apply to high-risk events such as overland water or sewer backups.
- No Deductible Options: Rare, but available—often with limited coverage or higher premiums.
Do You Always Have to Pay an Insurance Deductible?
No—not always. You don’t have to pay a deductible if:
- Another party is found at fault (e.g., in an auto accident)
- Your policy includes zero-deductible coverage for specific claims
Always check your policy documents or speak with your Morison Insurance broker to clarify when deductibles apply.
What If the Cost of Damage Is Less Than the Deductible?
If your repair costs are lower than your deductible, you won’t receive a payout from your insurer. In this case:
- Do not file a claim—you’ll be paying out of pocket anyway
- Filing could impact your future premiums without any financial benefit
It’s wise to reserve insurance claims for significant losses, especially for business or auto insurance.
How Does Your Deductible Affect Insurance Premiums?
There’s a direct relationship between your deductible and your insurance premium:
- Higher deductible = lower premium
- Lower deductible = higher premium
While saving on premiums sounds appealing, always choose a deductible you can comfortably afford in an emergency. Your broker can help balance risk and affordability.
How to Choose the Right Deductible
Factors to consider when selecting a deductible:
- Your financial situation – Can you afford a higher out-of-pocket cost?
- Risk tolerance – Are you comfortable with less frequent but higher expenses?
- Insurance type – Auto, home, commercial, etc.
- Claim history – Frequent claimants may benefit from lower deductibles
- Location – High-risk areas may warrant different strategies
A Morison Insurance broker will guide you through your options and help you tailor your coverage to your specific needs.
Get Expert Advice on Insurance Deductibles
Still wondering "what is an insurance deductible, and which one is right for me?" You don’t have to figure it out alone. The experienced brokers at Morison Insurance are here to help.
- Call us at 1-800-463-8074
- Get a free quote online
- Find a local Morison Insurance office near you
Protect yourself wisely—with coverage that’s customized to your needs and a deductible you can afford.
