A deductible is the portion of any covered loss that you must pay. For instance, assume your home sustains $5,000 of covered damage. If you have a $500 deductible, your policy will pay $4,500 and you will pay $500. When purchasing auto and homeowner insurance you can usually choose how high of a deductible to carry. (You should choose a deductible based on what you could afford to pay, without hardship, if a loss occurs.) By choosing a higher deductible, you agree to assume responsibility for more of your expenses should you have a claim. In return the cost of your policy is substantially reduced.