What is a deductible?
A deductible is the amount of money you must pay out of your own pocket toward a claim before your insurance company pays its share of the covered loss.
When you file an insurance claim, your deductible is the portion of the loss you agree to cover yourself. Once you pay this amount, your insurer covers the remaining eligible expenses, up to your policy limit. The deductible applies per claim, meaning you pay it each time you make a new claim during the policy period.
In auto insurance claims common across Ontario, if you have a $500 deductible and suffer $2,000 in collision damage, you pay $500 and your insurer pays $1,500. For home insurance, the same principle applies. A homeowner with a $1,000 deductible filing a claim for $8,000 in water damage pays the first $1,000; the insurer covers the remaining $7,000.
Deductibles vary by coverage type and policy. You typically choose your deductible amount when you purchase or renew your policy. Higher deductibles lower your premiums because you're assuming more financial risk, while lower deductibles mean higher monthly or annual costs but less out-of-pocket expense when you need to claim.
Understanding your deductible is essential for budgeting and knowing what to expect in the event of a loss. It shapes both the affordability of your policy and your actual cost if a covered incident occurs.