Deductible: meaning, definitions and examples

A deductible is the amount of money you are responsible for paying out-of-pocket before your insurance company starts to cover expenses. This term is commonly used in health, auto, and home insurance policies.

• I have a $500 deductible on my car insurance, so I'll pay that amount before my insurance covers the rest.
• This health plan has a $1,000 deductible, which means I'll need to pay that amount before insurance kicks in.

Excess, used mainly in British English, is similar to a deductible. It refers to the initial amount you have to pay when making an insurance claim, and the insurance covers the remainder. It's common in travel and car insurance policies.

• I need to pay a £250 excess for my travel insurance claim.
• The car insurance policy includes a £300 excess, meaning that's what I'll pay if I file a claim.

In insurance, surplus refers to the amount of income an insurance company has after it has paid out all claims and expenses. This term is more relevant in the context of insurance company finances rather than individual policyholders.

• The insurance company's surplus increased this year due to fewer claims.
• A high surplus indicates that the insurance company is financially healthy.

Self-insurance means setting aside your own money to cover potential future losses instead of purchasing an insurance policy. This practice is common among large businesses that can handle the financial risk.

• The company uses self-insurance to cover employee health benefits.
• Opting for self-insurance can be risky if you don't have enough savings to cover unexpected costs.