Deductible basics
A deductible is the initial amount paid by the policyholder on a covered claim; after this threshold, the insurer pays according to policy terms, and premiums typically fall as deductibles rise because risk‑sharing increases. Health deductibles generally reset annually, while auto and home deductibles apply per claim and are subtracted from the settlement payout.
Health insurance: deductible, copay, coinsurance
- Deductible: Amount paid each plan year before non‑preventive coverage begins; preventive care is often covered at 100% in‑network without hitting the deductible first.
- Copay: Fixed fee per visit or prescription, sometimes before the deductible; varies by plan and service type.
- Coinsurance: Percentage of costs paid after meeting the deductible until reaching the out‑of‑pocket maximum; once the max is hit, the plan covers 100% of covered care for the rest of the year.
Auto and home deductibles
- Auto: Separate deductibles for collision and comprehensive; choosing higher deductibles lowers premiums but raises the share paid after accidents or non‑collision events like theft or hail.
- Home: Deductibles can be a flat amount or a percentage of the dwelling sum insured; catastrophes (hurricanes, earthquakes) often carry special higher deductibles.
- Claim math: Deductibles are taken off the insurer’s payout; ensure the emergency fund covers the chosen level to avoid liquidity stress.
Choosing the right deductible
- Budget fit: Pick a deductible that can be covered from cash reserves without borrowing; align with an emergency fund sized to at least the largest single deductible exposure.
- Health usage: Heavy non‑preventive healthcare needs favor lower deductibles and higher premiums; low expected usage can justify a higher deductible paired with premium savings.
- HDHP + HSA pairing: Qualified high‑deductible plans can be paired with Health Savings Accounts, enabling tax‑free contributions, growth, and withdrawals for eligible expenses, which can offset higher deductibles.
- Risk trade‑offs: For autos with low market value, a very high deductible might render small claims pointless; for homes in catastrophe‑prone areas, model worst‑case percentage deductibles against savings.
Common pitfalls
- Confusing deductible with out‑of‑pocket max: The deductible is just the first layer; coinsurance and copays still apply until the cumulative cap is reached.
- Ignoring network rules: Out‑of‑network care may have separate, higher deductibles and limits; check plan terms before elective procedures.
- Setting deductibles above savings: A too‑high deductible can force debt or skipped care/repairs; calibrate to realistic liquidity.
FAQs
- Do preventive services count toward the deductible? Typically covered at 100% in‑network for HDHPs and many traditional plans, not requiring deductible first.
- Do deductibles reset? Health deductibles reset annually; auto/home deductibles apply per claim event.
- Are percentage deductibles common in home insurance? Yes, especially for wind/hurricane or earthquake coverage, tied to the dwelling sum insured.
- Can HSAs reduce deductible pain? Yes—eligible HDHPs allow pre‑tax HSA funding to pay qualified medical expenses, lowering effective costs.