An insurance deductible is the amount of a covered loss you absorb before your insurer pays anything. If your policy carries a $1,000 deductible and a fire causes $10,000 in covered damage, the insurer pays $9,000. Higher deductibles lower your premium because you keep more of every loss.
Your deductible appears on the declarations page, and it comes back up in every claim conversation. Knowing exactly how it applies keeps the settlement math from surprising you.
Deductible
The portion of a covered loss the insured retains, subtracted from the adjusted loss amount before the insurer pays, applied once per occurrence in most property policies.
How does a deductible apply per occurrence?
In commercial property policies, the deductible applies once per occurrence, meaning once per loss event, no matter how many items of covered property that event damages. One windstorm that tears up two buildings triggers one deductible, not two. Two separate storms a month apart trigger two.
The deductible also reduces the amount of the loss, not your limit of insurance, so a loss that exceeds your limit still pays the full limit. The order of operations matters too: if a coinsurance penalty applies, the adjuster reduces the loss for coinsurance first, then subtracts the deductible from what remains. When the adjusted loss is smaller than the deductible, the insurer pays nothing and the claim may still land on your loss history.
How does your deductible affect your premium?
Directly. The deductible is the slice of every loss you agree to self fund, and insurers price coverage down as that slice grows. Raising a property deductible from $1,000 to $5,000 buys a real premium credit, and it also filters small claims out of your loss runs, which helps at renewal.
The right level is the largest amount your business can absorb without strain in a bad month. A deductible you cannot actually pay is not savings, it is a gap. Some perils carry their own deductibles: wind and hail deductibles in storm prone states are often a percentage of the limit rather than a flat dollar amount, which turns a 2% deductible on a $2,000,000 building into $40,000.
How is a deductible different from a self-insured retention?
With a deductible, the insurer typically handles the claim from dollar one and collects your deductible afterward or subtracts it from the payment. With a self-insured retention, you pay first and the policy only starts responding once your own payments exhaust the retention. SIRs appear mostly in liability programs for larger businesses. If you carry a standard commercial property or auto policy, you almost certainly have a deductible, not an SIR.
Frequently asked questions
Do I pay my deductible to the insurance company?
Usually not as a check. The adjuster subtracts the deductible from the claim payment, so you receive the covered loss minus the deductible and cover the gap with the repair contractor yourself. Some programs bill deductibles separately.
Do liability policies have deductibles?
Standard general liability policies typically have none, so a slip and fall claim pays from dollar one. Larger businesses sometimes take liability deductibles or self-insured retentions in exchange for premium credits. Property, auto physical damage, and cyber almost always carry deductibles.
Is a higher deductible worth it?
Often yes, if you can absorb it. You save premium every year and keep small claims off your loss runs. Price the credit at two or three deductible levels and compare the annual savings against the extra retained risk.
What is a percentage deductible?
A deductible calculated as a percentage of your limit of insurance rather than a flat dollar amount, common for wind and hail. A 2% deductible on a $2,000,000 building means you retain $40,000 of a storm loss.
This definition is for educational purposes. Your policy's specific terms, conditions, and endorsements control. Talk to a licensed broker about your actual exposures.