What is an insurance deductible?

The short answer

A deductible is the policyholder's share of a claim. If a covered loss costs $4,000 and the policy carries a $1,000 deductible, the insurer pays $3,000 and the policyholder pays $1,000. A higher deductible lowers the premium because it transfers more of each loss to the policyholder; a lower deductible raises the premium for the opposite reason.

How does a deductible work on an Ontario policy?

The deductible is subtracted from the settlement on each covered claim, not once per policy year. An Ontario auto policy can carry different deductibles for different coverages, so collision and comprehensive are often set at separate amounts. Mandatory coverages such as third-party liability do not carry a deductible.

Deductibles apply per claim and per coverage. A home policy commonly carries one deductible for most perils and a separate, often higher, amount for specific endorsements such as sewer backup or overland water. An auto policy commonly carries one deductible for collision and another for comprehensive.

What does the deductible mean for an Ontario policyholder?

The deductible sets the point at which a claim becomes worth making. Where a loss is close to or below the deductible, no payment follows a claim. The deductible amount and the premium move in opposite directions, so the two are selected together rather than separately.

Which deductible belongs on a particular policy depends on the loss amount a household is prepared to absorb, the premium difference between the available options, and the coverages the policy carries. A licensed Sutherland Insurance broker can set out the options available across the markets Sutherland Insurance holds contracts with.

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