A deductible is the amount you pay out of pocket on a covered claim before your insurance pays the rest. A higher deductible generally means a lower premium, and a lower deductible generally means a higher premium.

Why it matters

Choosing a deductible is really choosing how much risk you want to carry yourself versus how much you want to pay in premium. A lower deductible means less out-of-pocket cost if you file a claim, but you pay for that in a higher premium every period whether you file a claim or not. A higher deductible lowers your premium but means a bigger bill if something happens.

What affects the answer

How much you could comfortably pay out of pocket. A deductible you can’t actually afford at the time of a claim can undermine the point of having coverage.
How often you expect to file claims. If you rarely file claims, a higher deductible paired with a lower premium may make sense to consider. If you’d rather minimize what you’d owe after an incident, a lower deductible is worth a look.
Whether the deductible is a flat amount or a percentage. Some policies, particularly for wind and hail on homeowners coverage, use a percentage-based deductible instead of a flat dollar figure.

An example

A driver in the Kansas City area compared a $500 deductible against a $1,000 deductible on their auto policy. The higher deductible lowered their premium meaningfully, and since they hadn’t filed a claim in over a decade, it was an option worth considering for their situation.

Questions worth asking

What would each deductible option actually cost me in premium?
Could I comfortably pay this deductible out of pocket if I needed to file a claim?
Is this deductible a flat dollar amount or a percentage of my coverage limit?
Does my deductible apply per claim, or does it work differently for certain events?