What is a Deductible? Types and Explanations

When signing an insurance contract, you may come across terms like “deductible”, “unconditional deductible”, or “conditional deductible”. This article provides a clear and practical explanation of these terms, along with real-life examples.

What is a Deductible?

A deductible is the portion of a financial loss that the insured person pays before the insurance company covers the rest. It directly impacts the compensation you receive in the event of an insurance claim.

Key Note

Most insurance contracts in Azerbaijan apply an unconditional deductible, meaning a fixed amount is always subtracted from the total loss, no matter how large or small the damage is.

Types of Deductibles

Unconditional Deductible

This is the most widely used model in Azerbaijan.

• A fixed amount is always deducted from every claim.

• If the damage is less than the deductible, no compensation is paid.

• If the damage exceeds the deductible, the remaining balance is paid.

Example:

• Deductible: 300 AZN

• Damage: 200 AZN → no compensation

• Damage: 800 AZN → 300 AZN deducted → 500 AZN paid

Conditional Deductible

• If the damage is less than the deductible, no compensation is paid.

• If the damage exceeds the deductible, the full amount is paid — nothing is subtracted.

Example:

• Deductible: 300 AZN

• Damage: 200 AZN → no compensation

• Damage: 800 AZN → full 800 AZN paid

Comparison Table

• A conditional deductible is more favorable for large losses.

• An unconditional deductible is more common and may reduce your insurance premium, though a fixed amount is always deducted.

What to Look Out For

Before signing any insurance agreement:

1. Check the deductible amount

2. Understand whether it is conditional or unconditional

3. Know how it affects your potential claim

Being aware of these details can help you make better insurance decisions.