An insurance deductible is the sum of cash you must pay out of your own pocket for an insurance claim prior to the insurance company starting to pay on the claim. It’s typically stated in the policy as a fixed dollar amount, rather than a percentage. As a general rule, insurance deductibles and insurance premiums are inversely related. That is, the higher the insurance deductible, the lower the insurance premium. And of course, vice versa.
For example, a typical automobile insurance policy may have a deductible of $500. What this means if the insured has an automobile accident, you have to pay for the cost of repairs up to $500. Therefore, if the total car repair costs are $1,200, you will have to pay $500 (your deductible) and your insurance company will pay $700. Once you have paid the $500, you are said to have met the deductible.
Deductibles are usually defined per incident or per year. They can also vary depending on the origin of the claim. For instance, the same insurance policy may have varying deductibles when the loss arises from fire, theft, or natural disaster.
Based upon the insurance company and policy, an insurance deductible can be raised or lowered depending on how risk the insured is willing to assume. Insurance deductibles typically work the same whether the policy is for the home, car, or medical.
A policy with an exceptionally low premium will typically have an exceptional high insurance deductible. The key is finding the right balance for you when buying an insurance policy. A too high deductible can lead you into a financial bind should you find you need a claim. Additionally, a too high of a deductible on a car that has limited value may not make the most financial sense. On the other hand, a too low deductible can result in you overpaying in premiums.
It is a good idea to always have savings set aside in the amount of at least the size of your deductible, should you have to make a claim in the future.
Have you ever verified over choosing a deductible on your car insurance or home insurance has made any effect on your premiums ? Let deductibles not be overlooked. They do provide a significant premium savings and benefit you over a period of time. Deductible is that amount of money paid by the insured party much before an insurance company’s coverage plan has begun it’s work. More the deductible, lesser will be your premium and vice verse. Deductible is considered in order to lower any insurance company’s risk level and intact legislate insurance policy holder’s premium. Common denominations for deductibles include $50, $100, $500, $750, $1,000, and $1,500.
For and Against of Deductibles
Adjusting your deductibles on higher note will show a considerable drop in your annual premium. Another factor certainly militates that the frequency of accidents occurring or claims made is not too high, this favors in paying higher deductible. On the other hand, the premiums you pay are absolutely in reach to maintain the coverage. It makes sense to take a financial risk with your insurance deductible.
Contrarily, If you found to be not secured and well equipped financially then setting a higher deductible can be disastrous when any accident or collision occurs. The savings made by choosing high deductibles over your premiums may be lost and even more. If you fail to pay for your deductibles then you may loose out on your asset until you come up with the money.
A Sound Decision
It is important that you review the deductible options you have chosen on your home or car insurance policies. It’s common for any insurance company to provide minimal discounts on your policies if made no claims, or very few claims. Choosing a higher deductible means you might pay for the smaller claims out of your own pocket, but you also get to keep the claims free discount on your policy. It is always best to have a check on your monthly budget and savings and then opt for a higher deductible. If you are not sound financially, its better to lower your deductible to protect yourself in the future.
When you’re in the market for homeowners insurance, you will probably spend a lot of time deciding whether to go for a policy with a lower monthly premium and high home insurance deductible, or a higher premium and a lower deductible. And though, in most cases, the amount of a home insurance deductible depends largely on how much the homeowner can afford on his or her monthly premiums, there are also other factors that influence insurance deductibles.
Do You Have the Cash?
It’s simple but true: the rainy day rule applies. No matter how much your home insurance deductible is, if you’re like most of us, you’ll have to dip into your savings in the event of damages. If you’ve got a savings account with a considerable amount of money you can access at any time, it might not be a bad idea to choose a higher home insurance deductible. With a higher home insurance deductible, you have the advantage of lower monthly premiums until disaster strikes—which it may never do. If this is the case, comparing quotes that feature a higher home insurance deductible should be your priority.
A Lower Home Insurance Deductible for Peace of Mind
If saving isn’t a luxury you can afford, or if you’re already using your savings for other things, like sending your children to college, it’s advisable to choose a higher monthly premium with a lower home insurance deductible. In the event of damages, you’ll be looking at a relatively lower sum for your home insurance deductible before your coverage kicks in. When comparing quotes, it’s the lower deductible that you’re looking for to keep your home safe.