Glossary

Deductible

The amount of a covered loss the policyholder bears before the insurer pays, set in the policy and subtracted from the loss.

Also called: policy deductible, per-occurrence deductible, deductible amount

A deductible is the part of a covered loss you absorb. On a property policy, the ISO building and personal property form (CP 00 10 10 12) first reduces the loss for any coinsurance penalty, then subtracts the deductible and pays the rest up to the limit. Say a covered fire loss adjusts to $48,000 against a $5,000 deductible (a hypothetical): the insurer pays $43,000. If the adjusted loss is $4,000, it pays nothing.

Deductibles come in several forms: flat dollar amounts; percentages of insured value for wind, hail or earthquake, as with a named storm deductible; and time deductibles, such as the 72-hour waiting period in the ISO business income form (CP 00 30 10 12). A liability policy can carry one by endorsement, CG 03 00, applied per claim or per occurrence.

Do not confuse it with a self-insured retention. With a liability deductible, the insurer's obligation attaches from the first dollar, and it may pay a claim and then bill you for the deductible portion. With an SIR, you pay first and the insurer owes nothing until the retention is used up.

A higher deductible lowers premium but moves risk onto your cash. Size it to what you could pay from reserves after a loss. deductibles vs self-insured retentions: who pays first compares the structures, and the deductible and retention break-even calculator finds the break-even.

Last reviewed October 10, 2026

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Related terms

Self-insured retention (SIR) The amount of a loss the insured must pay itself, often including defense costs, before the insurer's liability policy begins to pay. Named storm deductible A separate deductible, usually a percentage of insured value, for wind damage from a named hurricane or tropical storm, replacing the flat deductible. Retention The share of a loss a business pays itself, through a deductible, self-insured retention or captive, before insurance responds. Large deductible program A policy where the insurer pays claims and then bills you for losses up to a high per-claim deductible, in return for lower premium and secured collateral. Coinsurance A property policy condition requiring you to insure to a set percentage of value, or share the loss. (Health plans use the word for a cost share.)

Related guides

How to budget for business insurance Build an insurance budget from premium, deductibles, audits, taxes and fees, then test it against cash flow and total cost of risk, with a worked hypothetical. How much does business insurance cost, and what drives the price? No national average holds up. Price follows class, size, location, limits, loss history and the market. 2026 data from CIAB, Marsh, NCCI and Oregon DCBS. California's commercial property and wildfire market California commercial property after the 2025 LA fires: FAIR Plan limits to $20 million, surplus lines, wildfire discounts and the 2026 nonrenewal moratorium. A customer slip-and-fall liability claim, step by step, through renewal A hypothetical composite walkthrough of a general liability slip-and-fall claim: notice, reservation of rights, defense, med pay, settlement and loss runs. A commercial truck accident claim, step by step, from the scene to renewal A hypothetical composite walkthrough of a trucking accident claim: scene, notice, MCS-90, liability, physical damage, cargo, excess limits, subrogation and CSA. Climate change and the commercial insurance market How rising catastrophe losses reach commercial property buyers through price, deductibles, roof terms and availability, and what to check at renewal in 2026.

Related tools

Deductible and retention break-even calculator Compares two deductible or retention options by expected annual cost, finds the claim frequency where they cost the same, and shows what a bad year would cost. Business insurance quote comparison worksheet Enter up to four quotes and see total cost, the lowest limits, highest deductibles, missing coverages, surplus lines insurers, weak ratings and exclusions. Total cost of risk (TCOR) calculator Adds premiums, retained losses, fees, collateral, risk control and staff time into one annual cost of risk, and compares a current program with a proposed one.

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