Insurance: amount of money that the policyholders must pay out of their pockets before reimbursements from the insurance company begin. The deductible is usually set as a fixed dollar amount, though in some cases it can also be a percentage of the premium paid or some other formula. Some group health insurance plans set the deductible at a set percentage of the employee's salary, for example. In general, the higher a deductible a policyholder will accept, the lower insurance premiums will be. The insurance company is willing to lower its premiums because the company is no longer liable for small claims.
Taxes: see tax deductible .

1. in a tax return, applies to an expense that may be subtracted from income.
2. (noun) the initial amount of an insurable expense that the insured is required to pay before insurance reimbursement is made for a claim. This can take two forms:
   • Absolute dollar amount-amount the insured must pay before the company will pay, up to the limits of the policy. The higher the absolute dollar amount, the lower the premium.
   • Time period amount (elimination period/waiting period)-lengthof time the insured must wait before any benefit payments are made by the insurance company. In disability income policies, it is common to have a waiting period of 30 days during which no income benefits are paid to the insured. The longer this time period, the lower the premium.

amount of loss that insured pays in a claim; includes the following types:

1. Absolute dollar amount. Amount the insured must pay before the company will pay, up to the limits of the policy. The higher the absolute dollar amount, the lower the premium.
2. Time period amount (Elimination period/Waiting period). Length of time the insured must wait before any benefit payments are made by the insurance company. In disability income policies it is common to have a waiting period of 30 days during which no income benefits are paid to the insured. The longer this time period, the lower the premium.

   The consumer would be well advised to select the highest deductible (by dollar amount and/or time period) that he/she can afford. First dollar coverages are very costly. A high deductible allows the insured to self-insure expected losses-those of high frequency and low severity.