A deductible is the amount the insured must pay before the insurance carrier will pay any claim expenses. Claim expenses include attorneys' fees, court costs, and all other charges incurred by the insurer in defending a claim. Without First Dollar Defense (FDD) coverage added to a policy the insured would have to pay their deductible as soon as claim expenses begin to accrue. With FDD added to a policy, the insured would only be required to pay their deductible in the event the carrier commits to an indemnity payout.

Example: An insured submits a claim to their insurance carrier. They have a $5,000 deductible. The suit results in $400,000 in claim expenses before the court dismisses the case ruling the insured was not at fault. If the standard coverage is in place without FDD, the insured will owe the $5,000 deductible to the carrier due to the claim expenses incurred. If FDD coverage is in place, the insured owes nothing to the carrier because there was no indemnity/damage payout made.