Why deductible matters to a first-time founder
The deductible affects both the premium and how much cash a business needs after a loss. A cheaper policy with a large deductible may transfer less practical risk than expected. Founders should check whether it applies per claim, per event, per person or over a policy year.
Examples of deductible
A covered theft causes £12,000 of loss and the policy has a £2,000 deductible for each claim. The business bears the first £2,000 and the insurer may pay £10,000, assuming no other exclusions or limits apply. The exact settlement still follows the policy wording.
Common misunderstanding
It is not the same as a tax deduction. In insurance, the amount is retained by the policyholder rather than subtracted from taxable income. “Excess” is the common UK insurance term, while “deductible” is common in US wording; policies may structure them differently.
When to use it
Compare deductibles when buying or renewing insurance and include the amount in emergency cash planning. Read each policy’s definitions, aggregation rules, exclusions and limits rather than comparing price alone. Ask a regulated broker or insurer how the provision works in the relevant jurisdiction.