What is an Insurance Deductible? | Medical & Car Insurance

Insurance gives you peace of mind and financial protection when you need it most. But you may be hit with unexpected costs when making an insurance claim, such as insurance deductibles. It’s essential to understand precisely what your insurance policy entails to prevent any nasty surprises.

Anyone with insurance will have come across the term insurance deductible. It affects medical, home, and car insurance policies. But what is an insurance deductible, and how does it work?

Insurance deductibles come in different forms depending on the type of insurance and the insurance company. In South Africa, deductibles are also referred to as excess payments or fees. Read on to learn more about insurance deductibles.

What is a Deductible?

An insurance deductible refers to the out-of-pocket costs that must be paid before your insurance covers your claim. Once the deductible has been paid, your insurance will pay for the remainder of your claim.

In other words, an insurance deductible is a specific amount of money you have to pay for your insurance to kick in.

Insurers use deductibles to prevent clients from submitting fraudulent or minor claims. It also helps keep your insurance premiums down.

What Does Deductible Mean for You?

An insurer will not cover the costs of a claim that is less than your deductible. So if your insurance deductible is R3 000 and you make a claim of only R1 000, your insurer won’t cover the costs.

Your insurance deductible is generally directly related to your insurance premium. The higher your premium, the lower your deductible will be. And the higher your deductible, the lower your premium will be.

How Does an Insurance Deductible Work?

There are typically two main insurance deductibles: a fixed or flat deductible and a percentage-based deductible.

A fixed deductible is a specific amount of money you agree to pay. For example, let’s say your deductible is R1 000. If you make a claim of R3 000, you need to pay the R1 000 deductible, and your insurer will cover the remaining costs.

A percentage-based deductible requires you to cover a specific percentage of the value of your claim or loss. So if your deductible is set at 10% of the value of your claim, you will have to pay R1 000 on a claim of R10 000, for example.

What is a Health Insurance Deductible?

In South Africa, medical aid prices increase yearly. The high costs of health insurance cause people to choose coverage options with lower monthly premiums. But this results in higher deductibles and co-payments.

Medical Aid Co-Payments

Like a deductible, a medical aid co-payment is the amount you need to pay for your medical costs, while your insurer covers the rest. Often a medical aid plan doesn’t cover the entirety of your medical expenses. You will have to settle the remaining amount yourself.

For example, suppose your insurance policy covers doctor’s appointments up to R500 and your doctor charges R600. In that case, you need to make a co-payment of R100.

Co-payments are also required if you undergo a medical procedure that isn’t covered in your insurance policy. Generally, an insurer will also charge you if you use doctors, pharmacists or hospitals outside their designated group of service providers.

These co-payments are either a fixed amount or a specific percentage of your medical costs.

What is Car Insurance Excess?

Car insurance deductibles are referred to as excess fees. A car insurance excess fee is the pre-determined amount of money you need to pay when you make an insurance claim to cover the damage to or loss of your car. If your insurance claim is less than your excess fee, the insurer won’t cover the costs.

Your insurance policy determines the excess fee. Generally, car insurance policies with lower premiums require higher excess payments. This means that while you may save on your monthly premiums, you’ll need to make higher excess payments when you do make an insurance claim.

An excess fee is required even when you are not at fault or not the cause of an accident. This is to cover the administrative costs of the insurer who is handling your claim. It’s possible to claim your excess fee back from the person who caused the damage, but this is a long process.

Compulsory Excess

The compulsory excess amount is the standard fee for the specific type of car insurance you chose. The insurer determines this based on your risk profile, which is influenced by factors such as your age and the car you’re insuring.


Drivers younger than 25 and those with less than two years of driving experience must pay higher compulsory excess fees. This is because they are a bigger risk to the insurer than older, more experienced drivers.

Car Type

Owners of expensive car models generally have higher compulsory excess fees. Insurers do this because the high value of the car means that it would cost more to repair if it was damaged.

Voluntary Excess

Voluntary excess is the amount you choose to pay on top of your compulsory excess fee. You can lower your insurance premium by increasing your voluntary excess payments.

Additional Excess

Depending on your policy, there can be additional excess fees based on the nature and details of your claim. For example, if someone else was driving your car and was involved in an accident, you may need to pay additional excess fees.

Tips for Deciding on Your Deductible

  1. Consider your monthly budget and determine how much you can afford to pay for a deductible if you make a claim.
  2. Find out whether your insurer requires you to pay the deductible up front or whether the deductible is taken from your claims payout.
  3. Get insurance quotes from different insurers and ask about their deductible insurance options to find one that suits you.

Many hidden costs in insurance, like deductibles, might catch you off-guard if you are not well-informed. It’s best to understand your insurance deductibles, co-payments, and excess fees to ensure that you are prepared for any additional costs on your insurance claims.

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