How Does A Deductible Work In Home Insurance? 
A deductible is one of the ways your insurance carrier helps to keep insurance affordable . There are three basic ways your financial participation in insurance can work . First , you agree to pay premium for a policy . Second , in most policies , you agree to pay the first dollars of a property loss and that is what we call the `` deductible '' . -LRB- Do n't confuse a deductible with a co-payment agreement . -RRB- You also agree , whether you know it or not , to be responsible for every dollar of loss above and beyond the limits and amounts of insurance you purchased . These three are the ways you agree to pay for the losses you suffer . Most of us only encounter the deductible and premium payments as typical methods of paying for our losses . A deductible helps the carrier avoid the expense of investigating , processing , and paying small claims . A small claims , say under $ 500 , may cost as much to investigate , process and pay with a check or draft as the cost of the actual loss has cost the carrier . A deductible is a way for your insurance to cost less and a way for you to afford the cost of insurance . It is also a way for the carrier to avoid the costly process of paying small losses . When the cost of the repair or replacement of the property is determined , your deductible is subtracted from the final payment and you become responsible to contribute this amount to obtain the repair or replacement of your lost property . Deductibles are rather straightforward and I hope that the latter helps you understand the way a deductible works and why it is included as a part of your property insurance policy . 