A deductible is the amount an insured firm must pay or absorb under a policy before the insurer pays covered amounts, as the policy defines.
Definition
For a civil engineering firm, a deductible is the portion of a covered loss that the firm is responsible for under its insurance policy. The policy states whether it applies per claim, per event, or another way, and whether defense costs count toward it. A professional liability policy may handle legal defense expenses differently from a general liability policy, so the amount alone does not show the full cash exposure. Owners may include deductibles in claim planning and review how they affect cash reserves and insurance costs. Firms may track deductibles by policy, coverage part, or claim, depending on their accounting and risk processes. A deductible is not the policy's coverage limit, which caps eligible insurer payments, and it is not necessarily the same as a self-insured retention. Policy wording controls how the amount applies.
How owners use it
- Estimate the firm's cash responsibility for a covered claim under the policy terms.
- Compare proposed policy structures by reviewing the deductible alongside coverage limits and defense-cost treatment.
- For a $10,000 deductible on a $35,000 covered loss, $35,000 - $10,000 = $25,000 remains before considering policy limits and other terms.
- Record claim payments and deductible amounts by policy year or coverage part for internal reporting.
