A flat deductible is a fixed dollar amount the insured must pay on each covered loss before the insurer pays the rest, subject to the policy limit and terms. Unlike a percentage deductible, it does not change based on the insured value or claim size.
For example, a $500 deductible is flat because it stays $500 rather than being calculated as a percentage.
Why it matters in claims
Deductibles shape how a loss is shared between the insured and insurer. A flat deductible:
- makes the insured retain the first fixed amount of each covered loss
- reduces small claim frequency for the insurer
- gives the insured a predictable out-of-pocket amount
If the covered loss is less than the deductible, the insurer typically pays nothing.
Flat vs percentage deductible
The difference is straightforward:
- Flat deductible: fixed dollar amount such as $250, $500, or $1,000
- Percentage deductible: calculated from a covered value or limit, often used for catastrophe risks such as earthquake or hurricane
That distinction can materially change the insured’s out-of-pocket cost on large losses.
Related Terms
- Deductible
- Deductible Clause
- Franchise Deductible
- Disappearing Deductible
- Buy-Back Deductible
- Calendar Year Deductible
Knowledge Check
Loading quiz…