In the simplest of terms, a deductible is the amount of money that you are responsible to pay in the event that you need to file a claim. The insurance company will cover any damages about the deductible. Deductibles are in place so that both you and the insurance company share responsibility of any risks, and so that both parties have a stake in all claims made. All insurance policies, such as auto, home, renters, business, and health, will have a deductible.
The amount to pay will vary based on each person’s individual policy. On average, most car insurance deductibles fall between $500 and $1000, while most house insurance deductibles fall around $500 to $2000.
A premium is the amount of money that you would pay your insurance company in order to keep your policy active. Unlike a deductible, your premium is generally paid on a monthly, annual,or semi-annual basis.
Your deductible and your premium go hand-in-hand; if one is higher, than the other will be lower as a result. There are pros and cons to both options, most of which will be discussed in this blog.
Each type of policy will require you to pay your deductible when making certain and specific types of claims.
Under a car insurance policy, you will have to pay your deductible if you file a claim for any of the following:
In regards to a home insurance policy, if you file a claim for any of the following situations, you will have to pay your deductible:
Some situations on your home insurance policy may actually require you to pay an additional deductible. These can include water damages, sewer damages, and damages due to a hail or wind storm.
The short and simple answer to this question is yes; if you increase your deductible, you will save money on your premiums. However, this will truly depend on your own individual circumstance. In short, the higher deductible you choose the lower the premium.. It is important to keep in mind that if you were to increase your deductible you will be responsible to pay it to the insurance company should a claim occur, as we explain below.
The short answer to this question is also yes, but once again depends on each individuals’ circumstances. Having a high deductible could bring some serious financial consequences, especially if you are someone who tends to make frequent claims with your insurance company. Every time a claim is made, you will have to pay your deductible. If your deductible is extremely high, You will be responsible for paying it in full every time a claim occurs.
Having a high deductible could also negatively impact you in the event of filing a small claim. If the cost of damages you are filing for are less than the cost of your deductible, it will make no sense for you to even file the claim. It will ultimately cost less money for you to pay for the damages out-of-pocket. Racking up tons of small claims like this could result in you potentially losing a lot of money in the long run.
If you do decide that having a high deductible is not for you, there are a lot of other ways to save money on your insurance. Having an extremely expensive deductible is not your only option!
When deciding what deductible to choose, there are a number of important factors for you to consider.
Deciding what price to set your deductible at can be a tough decision. When making this choice, it is important to consider your own individual situation and how a higher or lower deductible can benefit you.
Have more questions about your deductible, premium or other coverage options? Get in touch with one of our licensed insurance professionals today.