Deductible

The amount (normally fixed) which a policyholder is obliged to pay prior to an insurance company paying a claim. Often also called excess. For instance, if a company insures its assets up to $100m with a deductible of $10 million, and it has a loss of $100 million, the company has to take care of $10 million, and the insurance company's liability is $90 million. Exactly the same principle may apply to personal insurance. The term can also refer to an item, such as charitable donations or tax allowances, deducted from gross income to reduce the amount of income subject to tax.