Deductible
The amount you pay out of pocket on an insurance claim before your insurer starts covering costs.
What Deductible means
A deductible is your share of a loss before coverage begins. On a health plan with a $2,000 deductible, you pay the first $2,000 of covered care yourself; after that the plan starts paying its portion.
Deductibles and premiums move in opposite directions. Choosing a higher deductible lowers your monthly premium because you are absorbing more of the risk — a sound trade only if you could actually cover that amount without borrowing.
Health, auto, and homeowners policies structure them differently. Auto and homeowners deductibles usually apply per claim; health deductibles reset annually and interact with copays and out-of-pocket maximums.
A high-deductible health plan is the gateway to a Health Savings Account, which carries its own tax advantages.
Related terms
Premium
The amount you pay an insurer — monthly, quarterly, or annually — to keep a policy in force.
Emergency Fund
Cash set aside in an accessible account to cover unexpected expenses or a loss of income without taking on debt.
Tax Bracket
An income range taxed at a particular rate — only the income inside that range is taxed at it, not your whole salary.
Run the numbers
Emergency Fund Calculator
Find out how much you need in an emergency fund and how long it will take to get fully funded.
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