Deductible

The deductible is the portion of a loss that the insured keeps for their own account before cover responds. It serves several complementary economic functions. It reduces the premium, since the insurer no longer responds to small losses, whose handling would often cost more than the indemnification itself. It limits moral hazard, by keeping the insured financially interested in prevention and in limiting damage, since they always bear a fraction of it. Finally, it sets aside the multitude of small losses, refocusing cover on the events that genuinely warrant a transfer of risk. A distinction is drawn chiefly between the straight deductible, always subtracted from the indemnity, and the franchise deductible, which disappears once the loss exceeds a certain threshold, as well as per-loss and aggregate annual deductibles. The amount of the deductible is an essential lever for the insured, a high deductible lowering the premium at the cost of greater retention, a low deductible offering more complete but more expensive protection. In cyber, substantial deductibles, sometimes combined with a waiting period, have become the norm to hold insureds accountable and to contain frequency losses.

A cyber policy provides a deductible of fifty thousand euros per loss. On an attack costing two hundred thousand euros, the company keeps the first fifty thousand for its own account and the insurer pays the remaining one hundred and fifty thousand.

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