deductible
The specified amount of money that the insured policyholder must pay out of pocket before an insurance company will pay for a claim.
A deductible acts as a risk-sharing mechanism. Choosing a higher deductible lowers your premium because you agree to take on more of the initial financial burden yourself.
Word relationships
- excess: In British and Australian English, 'excess' is the standard term for what American English calls a 'deductible'.
- co-pay: A co-pay is a fixed flat fee paid at the time of service, whereas a deductible is a cumulative threshold that must be met before full coverage begins.
Commonly confused with
- premium: The premium is the cost to buy the policy; the deductible is the cost to use the policy during a claim.
Word family
- deduct (verb): To subtract an amount from a total.
- deduction (noun): The act of subtracting, or the amount subtracted.
- deductible (adjective): Able to be subtracted.
Collocations
- high deductible
- low deductible
- meet a deductible
- annual deductible
Example sentences
- "He chose a high deductible to lower his monthly payments, knowing he would pay more out of pocket if an accident occurred." Auto Insurance
Memory hook
The insurance company will 'deduct' this amount from your total payout, so you must pay it yourself. Deductible is what they deduct from your check.
When not to use
Do not use to describe tax deductions, which are subtracted from taxable income, though they share the same root verb 'deduct'.
Fun facts
- The concept of deductibles was popularized in the early 20th century to prevent policyholders from filing tiny, expensive-to-process claims for minor scratches.
Explore more words
excess, Preventative care, deduction, insurance, Indemnify, reimbursement
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