Insurance Deductible
An insurance deductible is the amount you pay out of pocket on a claim before your insurance starts paying. A $1,000 deductible means you cover the first $1,000 of a covered loss. Choosing a higher deductible lowers your premium but raises your cost when something happens.
The trade has a break-even you can calculate rather than guess. If moving from a $500 to a $1,500 deductible cuts the premium by $200 a year, you are accepting $1,000 more exposure to save $200 annually — worth it if you claim less than once every five years, which most people do, and only bearable if that $1,000 already sits in savings. So the right deductible is the largest one your emergency fund could absorb without distress. A second reason favours the higher one: claim history affects future premiums, so a small claim just above a low deductible can cost more over several renewals than paying it yourself would have.