Deductibles, limits and your share of the cost
Learn how deductibles, benefit limits and cost sharing affect what you pay and what a policy can cover.
Deductible: the part you pay first
A deductible is an amount you are responsible for under the policy’s terms before certain benefits apply. It may be per claim, per year or per condition. Some deductibles are a percentage rather than a fixed dollar amount.
Limit: the boundary of a benefit
A limit sets how much the policy will pay for a covered loss or category of loss. There may be per-person, per-occurrence, aggregate or annual limits. Special categories of property may have lower sublimits.
Cost sharing: more than the premium
Health insurance can include copays and coinsurance as well as a deductible. Pet insurance may reimburse a stated percentage of eligible charges. Each policy defines what counts toward these amounts.
An illustrative property claim
Suppose an eligible covered repair costs $5,000 and the applicable deductible is $1,000. If the full repair is covered within the limit and no other adjustment applies, the insurer’s share would be $4,000. This example is not a quote or a promise of payment.
What a higher deductible changes
A higher deductible can lower the premium in some products, but it also increases what you may need to pay when a covered loss occurs. Compare the savings with an amount you could comfortably fund.
Keep the policy type in view
Home, auto, health, pet and life policies do not all use these terms in the same way. For example, a typical life insurance death benefit does not use the same claims deductible structure as collision coverage.
Source: NAIC consumer insurance resources. Prepared by PolicyFernway. Published October 6, 2026.
Alex Morgan
Liability limits, collision, comprehensive coverage and the relationship between auto and umbrella policies.
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