Insurance, like many other sectors, has its own lingo that can make shopping for coverage appear overly complicated. Your local independent insurance agent is always happy to explain anything you don’t understand and break things down for you. The term “deductible” is often used in auto, health, and other insurance policies.
An insurance deductible is the amount of money you, the insured, must pay for a claim before your insurance kicks in. If your insurance policy has a deductible, it implies you’ll be responsible for any losses or service payments up to the amount specified in your policy. Deductibles are typically expressed as a monetary figure, but they can also be expressed as a percentage.
The Advantages of Insurance Deductible
Deductibles are advantageous to both the insured and the insurance company. It can be a way for insured people to save money on their insurance: The smaller your premium, the more risk of loss you, the insured, choose to bear before the insurance kicks in. It’s a way for the insurance company to avoid the costs of processing and paying a large number of small claims. Discuss your deductible alternatives with your insurance agent to see how they may affect the cost of your coverage.
Consider the following scenario: You’ve been in a car accident, and the damage to your vehicle has been estimated at $1250. If your insurance coverage includes a $500 deductible, you will be responsible for the first $500 of vehicle damage and the insurer will cover the remaining $750. In most cases, after the deductible is satisfied, all subsequent losses you may incur during the policy’s term will be fully covered.
Understanding your insurance deductibles is a wonderful article from the Insurance Information Institute that explains how deductibles work and how they can save you money. It’s a solid overview with plenty of examples. They also go over disaster deductibles for the hurricane, wind/hail, flood, and earthquake insurance for homeowners.
Keep in mind that your homeowners’ insurance does not automatically cover you if your home is destroyed by flood, earthquake, or other natural disasters; check with your insurance agent to see what your policy covers.
Certain types of business insurance coverage, such as workers’ compensation policies, can also be purchased as deductible plans. Deductibles are a term that many individuals are familiar with because of their health insurance coverage.
You should examine your personal policy, as you do with any insurance. State laws, coverage types, and individual policies all affect insurance. Reading your policy and asking your insurance agent to explain any terminology you don’t understand is a good idea.