A deductible is the amount you agree to pay out of your own pocket toward a covered claim before your insurance starts paying. It is one of the main settings that shapes how an insurance policy works — and what it costs.
A simple example: if you have a $500 deductible and file a covered claim for $3,000 in damage, you pay the first $500 and your insurer covers the remaining $2,500.
The deductible and your premium move in opposite directions:
- A higher deductible generally means a lower premium — you take on more of the cost of a claim, so the insurer charges less.
- A lower deductible generally means a higher premium — the insurer covers more from the start, so it charges more.
How deductibles apply:
- Per-claim — common for auto and property insurance; you pay the deductible each time you file a covered claim.
- Annual — common for health insurance; you pay covered costs up to the deductible once per year.
- Some coverages, such as liability coverage, typically have no deductible.
Choosing a deductible: pick an amount you could comfortably pay if you had to file a claim tomorrow. A higher deductible lowers your premium but means more out-of-pocket cost at claim time — it is a balance between monthly savings and risk.
When you get an insurance quote from RMO, you can compare how different deductible levels change your premium.