An insurance deductible is the amount you, the insured, pay before any claim is paid by your insurance carrier. Depending upon the type of insurance, a policy may set the amount of deductible, or offer you the ability to select a deductible amount. Deductibles serve a dual purpose: they save the insurance company money (including the administrative cost of processing small claims) and may help keep your premium costs lower. Choosing the Right Deductible Amount Generally speaking, the trade-off between deductible levels and insurance premiums is simple: The higher the deductible, the lower the cost of insurance. Conversely, the lower the deductible, the higher the cost of insurance. Deciding how to make that trade-off is a function of math and your own comfort level with higher out-of-pocket costs if you choose a higher deductible. Only you can decide if saving $65 a year in premiums for a deductible that is $500 rather than $200 is worth it to you.¹ You may find that the re...