What is a deductible?

A deductible (called an excess in the UK and Australia) is the amount you pay out of pocket before your insurer pays on a covered claim. For example, with a $2,000 deductible on a $5,000 claim, you pay the first $2,000 and the insurer pays the rest. The IRS Publication 502 explains how deductibles work in health insurance for US taxpayers.

Coinsurance is your percentage share of covered costs after you meet your deductible. With 20% coinsurance you pay 20 cents of every dollar above the deductible, up to your out-of-pocket maximum. The HealthCare.gov glossary provides the official US definition.

What is an out-of-pocket maximum?

The out-of-pocket maximum is the most you will pay for covered services in a plan year. After you reach it, the insurer pays 100% of covered costs. See the HealthCare.gov definition for the official US explanation.

Is this site independent?

Yes. We do not sell insurance, earn commission or accept paid placement. Every page is reviewed by a qualified person before publication. The National Association of Insurance Commissioners (NAIC) and the UK Financial Conduct Authority (FCA) are examples of the official bodies whose guidance informs our content.

Where can I find my local insurance regulator?

Regulators vary by country. In the US, each state has its own Department of Insurance — find yours via the NAIC consumer portal. In the UK the regulator is the FCA. In Australia it is APRA. In Canada, OSFI oversees federally regulated insurers.

InsuranceTheGuide

Clear, reliable guidance on insurance — before you need it.

We explain how health, auto, home, life, travel and business insurance work, in plain language, so you can compare policies, read the terms with confidence and know what to do when you make a claim.

Begin with the essentials Use the cost calculator

Know what you need

Which risks matter at your stage of life.

Read a policy

Understand terms, limits and exclusions.

III

Compare the true cost

Premiums plus what you pay at claim time.

Make a claim

What to record, and when to act.

Insurance types

Eight types of cover, explained clearly.

Each section explains what the cover protects, what it commonly excludes, and the questions worth asking before you buy.

View all insurance types →

Health

Medical visits, hospital care, prescriptions and how provider networks work.

Read the guide →

Motor

Liability, collision and comprehensive cover, and what to do after an accident.

Read the guide →

Home & property

Buildings, contents, tenants' cover and natural-hazard extensions.

Read the guide →

Life

Term and whole-of-life covers, beneficiaries and choosing a sum assured.

Read the guide →

Travel

Medical care abroad, cancellation, lost baggage and delays.

Read the guide →

Business

Public liability, property, professional indemnity and cyber cover.

Read the guide →

Pet

Accident and illness plans, waiting periods and pre-existing conditions.

Read the guide →

Liability & umbrella

Protection when you are held responsible for another person's loss.

Read the guide →

Tool — Yearly Cost Calculator

The lowest premium is not always the lowest cost.

Enter a policy's figures and an expected claim amount to estimate what you would pay over a year — premiums together with your share at claim time.

Monthly premium $180

Deductible $2,000

Coinsurance (your share after deductible) 20%

Out-of-pocket maximum $6,000

Expected claims this year $10,000

Estimated total for the year

$5,760

Premium: $2,160 Your share of claims: $3,600

Total cost at different claim levels

$2,160

$4,260

$2,500

$5,760

$10,000

$8,160

$25,000

$8,160

$50,000

Claim amounts shown above each bar. Bar highlighted in gold is your expected level. Estimates use your inputs only — actual policies may apply copays and limits differently.

Coverage needs checklist

A short set of questions to identify suitable cover.

Policy comparison

Review two or three quotations side by side.

Life cover estimator

Estimate a sum assured from debts, income and dependants.

Home contents inventory

Record belongings room by room to insure the right amount.

The structure of a policy

Almost every policy is built from the same five parts. Once you know them, any policy becomes easier to read.

Declarations

Who and what is insured, the policy period and the premium.

Insuring agreement

The insurer's promise: which events and losses are covered.

Exclusions

What is not covered — the part most worth reading carefully.

Conditions

Your obligations: notice periods, proof of loss, cooperation.

Endorsements

Riders that add, remove or amend cover.

Featured guides

All guides →

Basics How insurance works: premiums, pooling and risk 5 min read Health Deductible and out-of-pocket maximum, explained with examples 8 min read Motor After a motor accident: a step-by-step guide 7 min read Home Natural hazard coverage: what your home policy covers 7 min read Basics The five parts of every insurance policy 6 min read

Six terms found in most policies.

Premium: The amount you pay to keep the policy in force, monthly or annually.
Deductible: The portion of a claim you pay before the insurer begins to pay.
Coinsurance: Your percentage share of costs once the deductible is met.
Limit: The maximum the insurer will pay for a covered loss.
Exclusion: A situation or item the policy specifically does not cover.
Rider: An addition that amends or extends the base policy.
Copay: A fixed amount you pay each time you use a covered health service.
Beneficiary: The person or entity designated to receive the proceeds of an insurance policy.
Named perils: A policy that only covers losses caused by the specific risks listed — if a peril is not named, it is not covered.
Aggregate limit: The maximum total the insurer will pay across all claims in a policy period; once exhausted, no further claims are paid.
Critical illness: A serious medical condition — such as cancer, heart attack, or stroke — listed in a policy as a trigger for a lump-sum benefit payment on diagnosis.
Mortgage protection: A type of life insurance designed to pay off a mortgage if the policyholder dies during the term; most commonly structured as a decreasing term policy.
Insured peril: A specific cause of loss that a policy explicitly covers. Claims are only paid if damage was caused by a listed peril.
Material fact: Any information that would influence an insurer's decision to accept a risk or the terms and premium at which they would accept it. Must be disclosed at application.
Policy schedule: The document issued by an insurer setting out the specific details of your individual policy — who is insured, what is covered, the sum insured, premium, excess, and any endorsements.
No-fault claim: An insurance claim arising from an incident for which the policyholder is not responsible. In motor insurance, a no-fault claim may still affect the no-claims discount if costs cannot be recovered from the at-fault party.
Proximate cause: The dominant, effective cause of an insured loss — the event that set the chain of events in motion leading to the claim. Insurers use proximate cause to determine whether a loss falls within a covered peril or an exclusion.
Utmost good faith: The legal principle (uberrimae fidei) requiring both the insurer and policyholder to deal honestly and disclose all material facts. Breach by the policyholder — including non-disclosure — is the most common reason policies are avoided or claims declined.
Reinstatement: In claims: settling a property loss by repairing or rebuilding the property rather than paying cash. In policy management: reactivating a lapsed policy by paying overdue premiums within the insurer's reinstatement window.
Liability limit: The maximum amount an insurer will pay for any single liability claim or in aggregate over a policy period. Amounts above the limit remain the policyholder's personal or business liability.
Void policy: An insurance policy treated as though it never existed — typically due to material non-disclosure or misrepresentation at application. The insurer owes nothing and may recover any paid claims.
Averaging: A clause that reduces a claim payout proportionally when the sum insured is less than the true replacement value. If you are 80% insured, the insurer pays only 80% of any claim.
Basis of settlement: How an insurer values a valid claim — either replacement cost (new for old, with no depreciation) or indemnity (current market value, reduced for age and wear).
Moral hazard: The risk that having insurance reduces a policyholder's incentive to prevent losses — because someone else will bear the financial consequences. Excesses and policy conditions are designed to counteract it.
Contribution: The principle preventing over-recovery when two policies cover the same risk. Each insurer pays only its proportionate share of a claim — you cannot collect the full loss from multiple insurers.

Browse the glossary A–Z →

Claims

How a claim usually proceeds

Procedures and timeframes vary by insurer and country, but most claims follow these stages.

Stage 1

Ensure safety

Protect yourself and others. Photograph where you are reasonably can.

Stage 2

Document the loss

Photographs, receipts, reports and witness details.

Stage 3

Notify your insurer

Within the notice period stated in your policy.

Stage 4

Assessment

An adjuster reviews the loss and checks it against your cover.

Stage 5

Settlement or review

Accept the offer, or request a review if you disagree.

Common questions

Frequently asked questions

: A deductible (called an excess in the UK and Australia) is the amount you pay out of pocket before your insurer pays on a covered claim. For example, with a $2,000 deductible on a $5,000 claim, you pay the first $2,000 and the insurer pays the rest. The IRS Publication 502 explains how deductibles work in health insurance for US taxpayers.
: Coinsurance is your percentage share of covered costs after you meet your deductible. With 20% coinsurance you pay 20 cents of every dollar above the deductible, up to your out-of-pocket maximum. The HealthCare.gov glossary provides the official US definition.
: The out-of-pocket maximum is the most you will pay for covered services in a plan year. After you reach it, the insurer pays 100% of covered costs. See the HealthCare.gov definition for the official US explanation.
: Yes. We do not sell insurance, earn commission or accept paid placement. Every page is reviewed by a qualified person before publication. The National Association of Insurance Commissioners (NAIC) and the UK Financial Conduct Authority (FCA) are examples of the official bodies whose guidance informs our content.
: Regulators vary by country. In the US, each state has its own Department of Insurance — find yours via the NAIC consumer portal. In the UK the regulator is the FCA. In Australia it is APRA. In Canada, OSFI oversees federally regulated insurers.