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Buying insurance coverage helps keep you protected from the full financial fallout of an accident or injury. But even with insurance, you’ll probably still be responsible for some costs when you file a claim.

An insurance deductible is the amount of money the insured party is responsible for at the time of loss or damage: it’s the cost you have to pay before the insurance company pays out its share.

Here’s what you need to know about the different types of insurance deductibles and other insurance-related costs you may face.

What Is a Deductible?

When you buy insurance, you’ll encounter several different costs depending on the type of coverage you’re purchasing. These may include monthly premiums, copays, out-of-pocket maximums, and possibly others.

The vast majority of insurance policies, whether they’re auto, health, or homeowners, carry a deductible. So what is a deductible, and how does it work?

The deductible is a sum of money you, as the insured party, are expected to pay toward a loss. Another way to think about it: It’s the amount the insurance company deducts from the total claim and asks you to pay.

For instance, say you get into a car accident in which you sustain $8,000 worth of damage and you have a $1,000 deductible. When you file your claim, you’ll pay $1,000 toward repairs, and the insurance company will cover the remaining $7,000 (or up to whatever limits are laid out in your insurance contract).

Your deductible can be a fixed dollar amount or a percentage, depending on your individual plan and the kind of insurance policy you’re talking about. Homeowners insurance, for instance, is commonly offered with deductibles calculated as a percentage of the property’s total insured value.

It’s important to understand that your deductible is separate from your premium, which is the amount of money you pay each month in order to keep your insurance policy active.

Also remember that you may also be responsible for other insurance-related expenses, like copays or coinsurance, so always read the fine print carefully.

Copay vs Deductible

With certain types of insurance — primarily health insurance products — you may be required to pay a copay each time you go to the doctor’s office or receive a covered service. This copay is separate from your deductible, and, generally, your copay doesn’t count toward your deductible amount.

As with other types of insurance, the health insurance deductible must be paid by the insured person before the insurance company begins its coverage. However, individual health plans may cover certain services, such as regular check-ups, even before the deductible is paid in full.

Here’s an example: Say you twist your ankle and visit your doctor, who orders an MRI. If your copay is $25, you’ll pay $25 at the office before or after you see your physician. If the total cost of the doctor’s care and imaging services is $1,000 and you have a $500 deductible, you may still be responsible for the full $500. Any copays you’ve paid along the way won’t be subtracted from your deductible.

Some plans may carry a coinsurance cost rather than a copay. The two are similar, but not identical. Coinsurance is an amount you pay when you receive a medical service, separate from your deductible. Unlike copays, which are charged at a fixed dollar amount, coinsurance is calculated as a percentage of the total cost of the service. Your plan might even include both copays and coinsurance.

All insurance policies are different, and your individual costs and experience may vary depending on the services you’ve received and the specific coverage you have. You can consult your insurance paperwork or contact your insurer for full details on what’s covered in your plan.

Out-of-Pocket Maximums

Health insurance policies in particular are subject to federally mandated out-of-pocket maximums. This is the highest total dollar amount you’ll have to pay toward covered healthcare over the course of a single year, including both deductibles and copays.

The out-of-pocket maximum does not include the amount you pay toward your monthly premium, however. Nor does it include out-of-network services or services that your plan expressly does not cover.

For 2025, the out-of-pocket maximum for a Marketplace plan can’t be more than $9,200 for an individual or $18,400 for a family. In 2026, that limit rises to $10,600 for an individual or $21,200 for a family. (The maximum is allowed to be lower, however, so consult your plan paperwork for full details.)

Do You Want a High or Low Deductible?

When shopping for insurance coverage, you’ll likely have a range of options to consider, including varying deductible costs. And when it comes to figuring out whether you want a high or low deductible, the answer is: It depends.

Generally speaking, the lower your deductible, the higher your premium will be and vice versa. This makes sense when you think about it. If you have a low deductible, the insurer will have to pay out a higher amount when you incur a loss. So in exchange for the promise of covering most of the costs when a claim is filed, the company expects you to pay more up front in the form of a higher premium.

While choosing a higher deductible can help you save money over time since your monthly premiums will be lower, it also means you’re assuming more risk. If something happens and costs are incurred, you’ll be responsible for a larger share of those expenses.

On the other hand, choosing a lower deductible means you’ll likely pay a higher premium each month. But you’ll also have less to worry about if you do need to file a claim, since the insurance company will cover more of the costs (assuming that all the damages and expenses are covered under your policy).

As with so many other financial matters, what’s right for you comes down to a number of factors, including your risk tolerance, budget, and even your lifestyle. If you participate in extreme sports, for instance, and are at risk for catastrophic injuries, you might want to pick a health insurance policy with a lower deductible and higher premiums.

Recommended: How Much Is Homeowners Insurance?

Zero-Deductible Insurance: Is It a Thing?

You may see ads for zero-deductible insurance policies and wonder if they’re too good to be true. While zero-deductible insurance policies do exist, they usually carry higher premiums than policies with deductibles, and you may also be responsible for a one-time no-deductible fee or waiver.

Furthermore, some insurance coverages are required by state law to carry a minimum deductible, particularly when it comes to auto insurance.

Before you sign up for any kind of insurance coverage, be sure to read the contract thoroughly to ensure you understand what costs you’re responsible for.

Recommended: What Does Auto Insurance Cover?

Types of Deductibles

There are many different types of insurance policies with deductibles on the market. Common ones include:

•   Health insurance deductibles

•   Auto insurance deductibles

•   Homeowners insurance deductibles

•   Renters insurance deductibles

•   Life insurance deductibles

The deductible amount varies by type of insurance, company, and plan, among other factors.

The Takeaway

Purchasing insurance is an important — and sometimes legally mandated — step toward protecting yourself from the high costs of personal accidents, property damages, and medical bills. But most policies involve set costs, including deductibles. This is the portion of the claim the insured party is responsible for paying.

Whether you’re comparison shopping or switching from your current plan, it’s important to understand what your deductible will be. Having a full picture of all the costs involved can help you find coverage that fits your life and finances.

When the unexpected happens, it’s good to know you have a plan to protect your loved ones and your finances. SoFi has teamed up with some of the best insurance companies in the industry to provide members with fast, easy, and reliable insurance.

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Coverage and pricing is subject to eligibility and underwriting criteria.
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Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, SoFi Technologies, Inc. (SoFi) and SoFi Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderlifeTM policies. SoFi is compensated by Ladder for each issued term life policy.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPRO-Q325-004

Umbrella insurance is a type of insurance policy that extends the personal liability coverage you probably already have through your homeowners or auto insurance. In other words, it’s a policy that helps protect your assets if you ever get sued for a whole lot of money.

Although most people won’t face a multi-million dollar lawsuit in their lifetimes, if you are the unlucky exception, an umbrella policy can help you avoid financial ruin. This is a relatively affordable kind of insurance coverage, too — although there are some additional costs it can require, which we’ll get into below.

Here’s what you need to know about umbrella insurance and how to decide if it’s right for you.

What Is Umbrella Insurance?

Certain types of insurance include liability coverage, which is insurance coverage that protects your finances and assets in case you get sued. You likely already have this kind of coverage, to some extent, through your homeowners or car insurance policy.

An umbrella insurance policy adds additional liability coverage on top of whatever coverages you might already have. That can be a lifesaver if you get sued for an amount of money large enough to exceed your existing liability insurance.

For example, say your auto insurance covers $25,000 in bodily injury liability per person and up to $50,000 in bodily injury liability per accident. It also covers up to $20,000 in property damage liability per accident. In total, you have a total of up to $70,000 per accident in coverage.

If you get into a fender bender, or even a moderately severe collision, that coverage might be sufficient. But say you get into a catastrophic accident that involves several cars and more than two people. That $70,000 isn’t going to be enough to cover multiple totaled vehicles or the medical bills for several hospital stays. If you’re sued for those losses and damages, you could lose your retirement savings, liquid savings and checking accounts, and potentially even your home.

If you have an umbrella insurance policy, it would kick in to cover the overage that your auto insurance policy doesn’t meet. Which is to say: umbrella insurance, as its name suggests, can protect you from a seriously rainy day.

But as with all insurance policies, it’s important to read the fine print.

What Does Umbrella Insurance Cover — or Not?

Although umbrella insurance is specifically meant to extend your existing liability coverages, it’s important to understand that these policies don’t cover everything. (Notably, umbrella insurance does not cover your personal property. It’s all about making sure your assets are covered when other people incur losses and damages.)

Although it’s always important to consult the specifics of the policy you’re considering for the full details, here’s a basic breakdown of what umbrella insurance typically does and does not cover.

What Umbrella Insurance Generally Covers

The good thing about umbrella coverage is that it’s an inclusive policy rather than an exclusive one. That means that instead of listing named perils, the way homeowners insurance does, umbrella insurance covers most liabilities with certain named exceptions.

But again, umbrella insurance is all about protecting you from the financial fallout of a lawsuit. It isn’t about protecting your physical home, car, or person from physical dangers. That’s why you still need homeowners, auto, and health insurance products.

Generally speaking, umbrella insurance covers liabilities related to:

•   Injuries

•   Property damage

•   Lawsuits

•   Other personal liability situations

Additionally, umbrella insurance usually extends to household members beyond you, the policyholder, and the incident doesn’t necessarily have to involve your personal property or vehicle to be eligible for umbrella coverage. Your umbrella policy might also cover you worldwide, with some exceptions. Again, consult your individual plan paperwork or insurance representative for full details.

What Umbrella Insurance Does Not Cover

Umbrella insurance is broad and inclusive, but it doesn’t cover every liability. Notable exceptions include:

•   Injuries sustained by you or your family or damages to your own property

•   Intentional actions that result in losses or damages (for example, if you get into a fight and punch somebody in the face)

•   Actions classified as criminal

•   Liabilities you agreed to assume in a contract you signed

•   Liabilities you incurred in your business or professional life. These require business liability insurance, which is a separate product

•   Liabilities caused by war or armed conflicts

What About Deductibles?

It’s also important to understand that even with umbrella insurance, you might still be responsible for paying a deductible when a claim is filed, whether it’s through the underlying insurance policy or the umbrella policy itself.

For example, imagine someone is injured during a party you throw in your home and they sue you for their medical costs and lost wages. Say your homeowners insurance policy covers up to $100,000 in personal liability, but your guest wins a lawsuit to the tune of $500,000.

If your homeowners insurance deductible is $1,000, you’ll need to pay that amount out of pocket before the homeowners coverage kicks in to pay for $99,000 toward the judgment. Then, your umbrella insurance would pay the additional $400,000, as well as any separate legal expenses related to the court proceedings.

Even if your underlying insurance doesn’t have a deductible, or if you use your umbrella policy to pay for a liability that other insurance policies don’t cover, you’d probably still be responsible for some of the cost. You’d likely be asked to pay a self-insured retention before the umbrella policy kicked in to cover the rest of the claim.

How Much Does Umbrella Insurance Cost?

Umbrella insurance is a relatively affordable policy, which makes it an attractive option for those seeking peace of mind in a “lawsuit happy” world. A $1 million umbrella policy costs about $150 to $300 per year, according to the Insurance Information Institute, and you can purchase even more insurance coverage than that for less than $100 per million.

That said, because their products kick in after regular insurance is used, most umbrella insurers will require you to carry a decent amount of coverage already through your baseline policies. You’ll likely need to buy a minimum of $250,000 in liability insurance on your auto policy and $300,000 in liability insurance on your homeowners policy in order to qualify, which means you’ll probably be spending more on insurance overall.

Is It Worth Having Umbrella Insurance?

Learning how umbrella policies work is one thing. But how do you decide whether or not you need this coverage?

At the end of the day, as with so many financial matters, it comes down to your personal choice and level of risk tolerance. After all, anyone can get sued. That said, there are some people who are at higher risk of getting sued than others.

For example, if you regularly have large, raucous gatherings on property you own, you run a decent risk of someone getting injured, which could result in serious medical bills. Ditto if your home has a trampoline or pool. If you’re the owner of a dog or the parent of a teenage driver, you might consider umbrella insurance in case of accidental damages. Celebrities and public figures also often take out umbrella policies.

The Takeaway

Umbrella insurance is an extended liability insurance product that can help protect you in case of a lawsuit. Depending on how likely you are to be sued and your level of risk aversion, you may want to add umbrella insurance to your list of coverages. It’s important to remember, however, that umbrella insurance doesn’t cover all contingencies. And whether or not you take out an umbrella insurance policy, you need basic insurance products like homeowners, auto, and renters insurance.

When the unexpected happens, it’s good to know you have a plan to protect your loved ones and your finances. SoFi has teamed up with some of the best insurance companies in the industry to provide members with fast, easy, and reliable insurance.

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPRO-Q325-005

Although investor sentiment plays into a stock’s price in the form of demand vs. supply, there are numerous factors that influence investor outlook. These include a company’s fundamentals, its performance history, as well as economic or geopolitical news that may impact not only that company but an entire sector.

These elements in turn can influence whether investors believe a stock will go up or down.

For investors interested in buying stock, it’s important to understand the various ingredients that can determine stock price, even though what influences a stock’s price per share can change at a moment’s notice.

7 Factors That Determine Stock Price

Beyond the basic principles of supply and demand, there are other factors that contribute to changes in stock prices. Those include investor behavior, the news cycle, company fundamentals, and more.

1. Investor Behavior

A current stock price is based on investors’ beliefs about the future success of a company. Hypothetically, if investors have reason to believe that a company will be successful in the future, they may invest in the company, causing the price of shares to increase. This is an important aspect of stock trading basics.

Similarly, if the outlook for a company is negative, investors may sell off the shares they own, causing the price to decrease.

Basically, if a few million people think that Company X is going to be successful in the near future, and that shares of Company X will see price appreciation that could lead them to buy the stock, increasing demand, which could drive up the price per share.

Emotions such as fear, panic, anxiety, greed, and hope can have a significant impact on investor behavior. This is the basis of the field of behavioral finance and understanding investor sentiment.^[1] There are many different ways investors try to predict the future success of companies.

2. Company News and Data

Stock price predictions can be made based on reading stock charts and making calculations, as well as looking at news stories, fundamental analysis like reading over company earnings and reports, and other information.

News about changes in management, production, company or industry scandals, and other stories can influence investors’ view of a company, and cause share prices to change quickly.

3. World Events

Beyond news and outlooks specifically related to companies, global factors can also influence investor behavior. For instance, a presidential election, a pandemic, political unrest, or signs of a recession can create panic in the market, influencing investors to sell off stock shares in order to avoid losses, or put their money into safer investments.

Usually there is some up or down price movement in stock prices, and some stocks are more volatile than others. It’s rare for prices to completely remain static. It’s also rare for prices to drastically increase or decrease suddenly, but this is what happens during a market crash.

A market crash can happen when many investors begin to sell, creating a snowball effect where more and more investors pull their money out of the stock market. At that point, the market could plummet, resulting in losses that wouldn’t have occurred if people hadn’t sold.

4. Stock Buybacks

Another factor that can affect stock price is company buybacks of stocks. Companies will sometimes buy back their own stock from investors, thereby reducing the supply of shares available to the public. They do this in an attempt to increase stock prices.

If companies issue more shares of stock, they are increasing the supply, which can cause the price to decrease.

5. Primary and Secondary Markets

When some companies first start selling stock to the public, they hold an IPO, or initial public offering. At the time of the IPO, an initial share price is set and investors can begin to buy the stock at that price, which is considered a primary market.

After the IPO ends, the stock gets listed on stock exchanges (or secondary markets) and the price starts to fluctuate as shares get bought and sold — and supply and demand begin to play a role in share price.

When companies don’t have an IPO, their shares get bought and sold privately, in which case share price is determined between the buyer and seller.

6. Stock Valuation

The valuation of a stock is made by looking at the company’s past and projected earnings, large trades made by institutional investors, overall market trends of the S&P 500, and ratios and calculations made by analysts.

Four ratios and calculations that are used to determine the valuation of a stock are price-to-earnings (P/E) ratio, price-to-book (P/B ratio), price-to-earnings-to-growth (PEG) ratio, and dividend yield. These calculations can help investors figure out whether a stock is currently undervalued or overvalued.

7. Bid and Ask Price

A share price ultimately gets determined through the bid, ask, and sale price on stock exchanges. The bid price is the maximum amount an investor will pay for shares of a stock, while the ask price is the lowest price a seller will accept. When the two prices match up, a sale is made, and that price sets the new price per share of the stock. Ultimately it gets down to what someone is willing to pay and if a stock owner is willing to sell to them at that price.

What someone is willing to pay or sell for is determined by psychological and market factors, as discussed. If a buyer thinks the stock is undervalued at the asking price, they will buy, and vice versa. Generally the difference between the bid and ask price isn’t very large, but if a stock’s trading volume isn’t particularly large, it can be.

Companies that are a similar size or have a similar valuation can have very different share prices because the number of shares each company issues can differ greatly.

Because of different company market caps and numbers of liquid shares, the share price doesn’t reveal much about the actual value of the company, and one can’t use share prices to compare companies. However, the share price does reflect what investors currently think the stock of a company is worth.

How to Handle Changes in Stock Price

Attempting to time the market is extremely challenging because there’s no way to reliably predict market movements. For example, an investor could sell at what they think is the peak of the market, only to watch the price continue to rise.

Historically, the stock market has continued to rise over the long term, despite plenty of ups and downs along the way. Although past trends are never a guarantee of future outcomes, it’s likely that investors with a longer time horizon, who are willing to hold onto their stocks throughout up and down cycles, may eventually see positive returns.

That said, market volatility can provide opportunities to invest when the stock market is down, or sell at higher prices, especially if they were already considering buying or selling a stock.

The Takeaway

Ultimately, supply and demand drive stock prices — which is informed by market conditions, world events, and investor behavior, among other influences. Although there is no way to look into the future to predict share prices, investors tend to look at past performance, charts, and market trends to attempt to predict price movements. In general, it’s best not to try and time the market, but to focus on building a solid long-term portfolio that will grow over time.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

FAQ

What are three things that determine a stock’s price?

Broadly speaking, the three main factors that drive a stock’s price are economic/market conditions, company performance, and investor sentiment. These three factors are interdependent, with one influencing the other.

Who or what controls the price of a stock?

There isn’t one sole entity that influences the price of a stock, and owing to the interplay of factors in the stock market, there is no single source of control over a stock’s price.

What makes the price of a stock go up?

There is no way to predict whether a stock’s price will rise or fall, but generally speaking investor demand is what ultimately drives up the price of a given company. But there are numerous factors that play into investor demand.