A deductible is a standard policy provision that requires the insured to pay part of the loss. A deductible is a provision by which a specified amount is subtracted from the total loss payment that otherwise would be payable.
Deductibles are typically found in property, health, and auto insurance contracts. However, a deductible is not used in life insurance because the insured’s death is always a total loss, and a deductible would reduce the face amount of insurance. Also, a deductible generally is not used in personal liability insurance because the insurer must provide a legal defense, even for a small claim.
Purposes of Deductibles
Deductibles have several important purposes. They include the following: