As a policyholder, it’s important to understand what your insurance deductible is and how it affects your coverage. Your deductible is the amount you agree to pay out-of-pocket before your insurance policy kicks in to cover the remaining cost of a covered loss. A deductible can be used as a tool to lower your premium but you want to make sure that your deductible is set to a limit that you can afford.
For example, if you have a $1,000 deductible on your auto insurance policy and get into an accident that causes $5,000 in damages, you will need to pay the first $1,000 of the repair costs out-of-pocket. Your insurance company will then cover the remaining $4,000, up to the limit of your policy.
The purpose of a deductible is to reduce the number of small and frivolous claims that policyholders make. Customers have less incentive to file a small claim when a large portion of their claim may be paid by their deductible. Less claims saves insurance companies money which in turn lowers customers premiums because of the deductibles. However, it’s important to choose a deductible that you can afford to pay in case of a loss.
Different types of policies may have different deductibles. For example, your home insurance policy may have a separate deductible for windstorm damage or hurricane damage. In Florida for example, a home deductible is generally $1,000 or $2,500 and the hurricane deductible is generally around 2% of the dwelling coverage for your home. So, if your home insurance has the cost to rebuild your home at $400,000, your 2% deductible would be $8,000.
Similarly, your health insurance policy may have a separate deductible for prescription drugs. Make sure you understand what deductibles apply to your policies and how they work.
Here are some key things to keep in mind when it comes to deductibles:
- Choose a deductible that you can afford to pay. If you can’t afford to pay your deductible, you won’t be able to make a claim. Talk to your insurance agent about the deductible options, how the deductible affects your premium and what you can afford.
- Consider raising your deductible to lower your insurance premiums. This may be a good option if you have enough savings to cover the higher deductible if you need to make a claim. If you have considerable savings, raising your deductible may be a cost effective option.
- Understand how your deductible applies to different types of losses. Some policies may have different deductibles for different types of losses. It is very likely your auto insurance deductible is different from your home, than is different from your renters or health insurance.
- Read your policy carefully to make sure you understand your deductibles and how they apply to your coverage. If you have questions, talk to your insurance agent or broker.
- Remember that the purpose of insurance is to protect you from catastrophic losses, not small ones. Consider using your insurance for major losses and paying for small losses out-of-pocket.
In conclusion, understanding your insurance deductibles is an important part of being a responsible policyholder. By choosing a deductible that you can afford, considering raising your deductible to lower your premiums, and understanding how your deductible applies to your coverage, you can make informed decisions about your insurance coverage. If you have any questions or concerns about your insurance policy, don’t hesitate to reach out to an agent on our team at EnsureUp for more information. Visit our website at www.ensureup.com to learn more or fill out your information for a quote.