Almost without exception, a deductible clause is included on all policies. A deductible represents the amount the insured is required to pay for each loss before receiving any payment from the insurer. The amount of the deductible is the amount the insured retains or contributes to the loss settlement. The deductible is considered to be a partial retention of the loss amount. For example, if the deductible stated on the policy is $1,000, the insurer is responsible only for those amounts over $1,000.
What deductibles accomplish
The higher the deductible, the lower the premium paid. In consultation with your broker you should aim to select a deductible that you can realistically afford to pay for in a loss situation. The application of a deductible therefore helps to make insurance more affordable. Insurers normally will provide you with deductible options depending on your tolerance to risk.