Based on insurance industry parlance, a deductible is an amount of money an insured person or party is required to pay before the insurance company begins the coverage of the person or party’s insurance plan. Usually, insurance companies will add a deductible in their insurance plans as a way of not having to pay out benefits on what they consider as small claims.
For example, an auto insurance policy may impose a $400 deductible. In the event the car owner has an accident and hits another car and damage is deemed minimal, the car owner will pay $400 from his own pocket. But if the owner meets an accident again with the same minimal damage, it is now the insurance company’s turn to pay for the repairs. This means the owner has already met the deductible and can now enjoy the benefits of complete protection. This is also the same policy in handling medical insurance. Patients will have to shell out and pay for minor injuries or procedures on their own until they have reached the deductible set in their insurance plan. If the medical expenses incurred by the patient is more than the stated deductible the insurance company will pay it but will deduct the amount of the deductible. Either way, the policy holder will always have the responsibility of paying for a portion of their own insurance claims.
The amount set in the deductible is usually a proportion of the amount of the premiums that are charged by the insurance company. If the policy older wants to have a lower deductible, or even zero deductibles, then he will have to agree to getting a plan with higher premiums. This also happens vice versa – a person who wants lower premiums will have to pay a higher deductible.