A deductible is the amount of money a policyholder must pay out-of-pocket before their insurance coverage kicks in. For example, if you have a health insurance plan with a $500 deductible, you will need to pay the first $500 of your medical expenses yourself. After reaching this amount, your insurance will start to cover a portion of your costs. Deductibles can vary widely depending on the type of insurance, such as auto insurance or homeowners insurance. Higher deductibles often result in lower monthly premiums, while lower deductibles typically lead to higher premiums. It's important to choose a deductible that fits your financial situation.