A deductible is the amount of money you pay out of pocket before your insurance kicks in. If your claim is $1,000 and your deductible is $200, your insurance company will pay you a maximum of $800 for the loss. The higher your deductible, the lower your premium. Why do insurance companies include this in their policies? To keep administrative costs—and premium prices—as low as possible, especially by eliminating small claims.

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