Deductible Clause

What Does Deductible Clause Mean?

A deductible clause is a provision in an insurance contract requiring the insured to pay a specified amount out-of-pocket before the insurance policy begins to cover losses. These clauses are used across various types of insurance and can vary significantly in the deductible amounts specified. Picking a higher deductible usually lowers your premium, which is why many drivers weigh whether to increase their auto insurance deductible when their policy comes up for renewal.

Insuranceopedia Explains Deductible Clause

Deductible clauses allow policyholders to share a portion of the financial responsibility with their insurance companies. Typically, deductibles constitute a small fraction of the insurer’s annual aggregate limit for a policy. For instance, a health insurance policy might have a deductible of $4,000, while the insurer’s annual aggregate limit is $100,000. While deductible clauses require policyholders to cover part of their insured expenses, this amount is generally minimal compared to the insurer’s financial responsibility. Deductible amounts also vary by company, so when shopping for home coverage, comparing how the best homeowners insurance companies structure their deductibles is one practical way to tell policies apart.