Insurance deductibles are something that our insurance agency gets asked about quite often. We find that many of our customers have heard the term before, but they aren’t sure exactly what they are. In even more scenarios, they know about their deductible and what it’s for, but they aren’t sure how to select a deductible amount that’s right for them. Today, we want to review insurance deductibles, how they work, and how our agency can help you with finding the best insurance deductible to meet your individual needs. After all, we take pride in keeping our customers free from worry!
What is an Insurance Deductible?
For those of us who may not be familiar, you may be asking yourself, “What exactly is an insurance deductible?” An insurance deductible is the amount of money you are obligated to pay toward a claim before the insurance coverage kicks in to start paying you for repairs, replacements, or other fixes from a result of your claim. Basically, it’s your financial responsibility when it comes to your insurance contract; you have to come up with the amount of money your deductible is worth in order to get compensated for a claim. Once you pay your deductible, the insurance company agrees to pay the rest of the claim.
In other words, when you buy an insurance policy, you are asking the insurance company to have your back if a loss is going to put you at financial risk. In response, the insurance company agrees to cover you, as long as you pay the first part of the loss through your deductible amount.
Different Types of Deductibles
With different types of insurance policies comes different types of deductibles. Whether you are looking to get health insurance coverage, life insurance coverage, auto insurance coverage, or other coverages, this can affect how much your deductible should be worth. Sometimes it is better to have a lower deductible on an auto insurance policy, or even a high deductible on a homeowner’s insurance policy. This may not always be the case, but ultimately, our professional agents can help you with deciding. It’s not up to our agents to make the final decision on your deductible though, so you may be wondering who does get to make that decision.
Who Decides on your Deductible?
At the end of the day, the insured (you, the customer) gets to make the final decision on how much you want your deductible amount to be. You can find out how much your deductible is in the declaration pages of your insurance policy. Additionally, you can always ask one of our insurance agents about your deductible before signing off if you need to understand it better, but our agents will certainly review it with you if you are a first time customer.
Deciding on a deductible amount can raise or lower the amount you pay on your insurance premium. The higher the amount of your deductible, the lower you will end up paying on your premium. And vice versa, the lower your deductible, the higher you will end up paying on your premium. If you lower your deductible, your insurance premium goes up, because if you have a loss, you won’t have to pay as much on your deductible. To have that convenience, the insurance company raises your premium amount. Most people think that raising a deductible will end up saving you money in the end on your insurance, and that lowering a deductible is a safe route in case of a claim. Although, this may not always be the case. So how do you decide on a deductible that’s right for you?
Deciding the Right Deductible
We’d like to review two situations: the potential effects of lowering a deductible, and the potential effects of raising a deductible, to help you better understand your coverage.
With a lower deductible, you may see the price of your premium increase. While you make think this could be more of a financial burden for you, in the case of a claim, this could save your back in the end. This is especially true in the case of auto related claims, such as an accident. If you can’t immediately afford $1,000 on a claim out of pocket, then we will suggest a lower deductible (although we never go lower than $500 on an auto deductible). If you had a claim worth $3,000 for instance, and you had a deductible of only $500, then that would be all you’d have to pay out of your own pocket. Although, if you can afford a bit more out of pocket, then we could suggest a higher deductible to see monthly savings on your premium. It all depends on your personal financial situation.
With a higher deductible, as we mentioned, you could see savings on your premium as a whole. This is more typically seen in homeowner’s insurance policies. Think about it this way, in most cases, homeowners aren’t looking to make claims that are worth $1,000 out of pocket, and in some cases they wouldn’t want to file a claim that are worth even $2,000 or more. This is because any time you file a claim on your insurance policy, it can affect the price of your premium, so you will end up paying for that claim overtime in your monthly payments. It’s best to file claims that are worth much more, such as a house fire. If you have a larger deductible on a home insurance policy, but you suffer major loss, you’ll have saved on your premium in the meantime and still be able to come back from large loss.
Overall, our insurance agents can help explain this concept to you in person, or over the phone, whenever you’d like to discuss your deductible. If you explain your financial situation to us, what coverage you need, and so on, we can direct you toward a deductible amount that is right for you. Additionally, once we work out the fine details of your policy, we are happy to shop your coverage out for you among the many carriers we represent, to find you the very best price on your insurance quote. If you need help or have questions on your insurance deductible, contact one of our professional insurance agents today!