Deductible
The amount a policyholder pays out of pocket before insurance responds, per claim or per year.
Overview
Higher deductibles cut premiums because they filter small claims and share cost, so raising an auto deductible from 250 to 1,000 dollars can meaningfully reduce collision premium. Deductibles fight moral hazard, the tendency to spend carelessly what costs nothing, and in health plans steer members toward value conscious choices, with the acknowledged risk of deferred needed care. Special forms include percentage deductibles for wind and quake computed on dwelling value, franchise deductibles that pay nothing below the threshold and everything above, and calendar year accumulators in health coverage. The right size is the largest sum a household could fund twice in a bad year without borrowing.
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