CLAIMS & POLICY MECHANICS
Deductible definition
A deductible is a policy feature that requires the insured to bear part of a loss before the insurer pays the remaining claim.
In practice, this means the portion of an insured loss borne by the insured (rather than the insurer). A deductible may be arranged as an agreed amount or an agreed percentage of the policy limit and only once this amount or percentage level is exceeded does the insurer become liable for the loss. This gives insurers, brokers, reinsurers and risk managers a shared way to discuss the concept when reviewing policies, claims, regulation or market data.
This term is especially useful in insurance market analysis, policy wording and risk transfer decisions. It helps determine how much the insurer may pay and how much risk remains with the insured. It also helps users compare how insurance is structured, regulated, priced or claimed across different markets.
Deductible is closely related to excess, limit of liability, claim and self-insured retention. Linking these concepts together helps build a clearer glossary structure and gives readers a stronger understanding of how individual insurance terms connect within wider international insurance practice.
At a glance
- Used in
- Insurance market analysis, policy wording and risk transfer decisions.
- Purpose
- Helps determine how much the insurer may pay and how much risk remains with the insured.
- Important because
- Small differences in policy limits, values and retained amounts can materially affect claim outcomes.
- Related terms
- excess, limit of liability, claim and self-insured retention.
Example of a deductible in insurance
A policy has a deductible of GBP 10,000. If a covered loss is GBP 50,000, the insured bears the first GBP 10,000 and the insurer considers the remaining amount subject to the policy terms.