insurance

deductible

The amount you pay out-of-pocket before your insurance begins to cover costs, or an expense that can reduce taxable income.

Example

“Her health insurance had a $2,000 deductible, meaning she paid the first $2,000 of medical costs.”

Memory Tip

DEDUCT-ible — something you DEDUCT. It's deducted from your insurance payout or your taxes.

Why It Matters

Understanding your deductible helps you plan for healthcare costs and choose insurance plans that match your budget. A lower deductible means you pay less before coverage starts, but your monthly premiums are usually higher, while a higher deductible does the opposite.

Common Misconception

Many people think their deductible is the same as their out-of-pocket maximum, but the deductible is just the first amount you pay before insurance kicks in. You may still owe copayments and coinsurance even after reaching your deductible.

In Practice

If you have a health insurance plan with a $1,500 deductible and you visit the doctor for an injury costing $2,000, you pay the full $1,500 first, then your insurance covers a percentage of the remaining $500. Once you have paid $1,500 in deductibles during that year, your insurance begins sharing costs with you.

Etymology

From Latin 'deducere' meaning 'to lead away' — an amount led away (subtracted) from coverage or taxes.

Common Misspellings

deductabledeductibedeductibeldeductiblee

Related Terms

premium copay tax deduction

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