Your deductible is the amount you pay out-of-pocket before your insurance coverage kicks in. It's your skin in the game—the portion of any claim that's your responsibility.

Paying higher deductibles typically means lower premiums during the course of the year since you're taking on more of the initial risk. For example, choosing a $1,000 deductible instead of $500 might save you $200 annually in premiums. The key is finding the sweet spot where you can comfortably afford the deductible if you need to file a claim while also keeping your premiums manageable. Remember, you'll pay the deductible each time you file a qualifying claim, so factor that into your emergency fund planning.