# Why are deductibles (or excesses) applied to insurance policies?

**URL:** <https://reachback.builtintelligence.com/t/why-are-deductibles-or-excesses-applied-to-insurance-policies/256>\
**Category:** Risk and Insurance\
**Created:** [11 October 2012 10:48 UTC](https://reachback.builtintelligence.com/t/why-are-deductibles-or-excesses-applied-to-insurance-policies/256 "2012-10-11T10:48:11Z")\
**Posts on this page:** 2\
**Page:** 1

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**Author:** ![BuiltIntelligence](https://avatars.discourse-cdn.com/v4/letter/b/919ad9/32.png) [@BuiltIntelligence](https://reachback.builtintelligence.com/u/BuiltIntelligence)\
**Post date:** [11 October 2012 10:48 UTC](https://reachback.builtintelligence.com/t/why-are-deductibles-or-excesses-applied-to-insurance-policies/256/1 "2012-10-11T10:48:11Z")

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Why are deductibles (or excesses) applied to insurance policies?

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<div class="post-metadata">

**Author:** ![BuiltIntelligence](https://avatars.discourse-cdn.com/v4/letter/b/919ad9/32.png) [@BuiltIntelligence](https://reachback.builtintelligence.com/u/BuiltIntelligence)\
**Post date:** [11 October 2012 10:48 UTC](https://reachback.builtintelligence.com/t/why-are-deductibles-or-excesses-applied-to-insurance-policies/256/2 "2012-10-11T10:48:39Z")

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They are applied in order to:

```
	Reduce the risk which the insurer takes on.

	Ensure that the insured party retains a degree of liability by having to pay a deductible (or excess). This motivates him to take more care in avoiding the loss or damage.

	Decrease the level of premiums paid by the insured party

	Negate the administration costs of processing a large volume of small claims.
```