Understanding Your Insurance Deductible
How many of us sit down and study our insurance policies? We may do so when we first take out the coverage, but usually, we forget about coverage until we need it. An essential part of our insurance policies is the deducible. If you are unsure what this is and how this can affect your premium and coverage, read on!
The insurance deductible is the amount of money you will pay in an insurance claim before the insurance coverage kicks in to help. It is your portion of the financial responsibility and forms part of your insurance contract. You determine how much you want to pay when you take on the policy. In a claim, you pay your deductible and the insurance company then agrees to pay you the rest (up to the policy limits and conditions in the wording).
In general, the higher your deductible, the lower your premium will be. This is because you agree to take on more financial responsibility in the event of a claim. Here’s a quick look at how deductibles affect your policy:
- The higher your deductible, the lower the premium
- A deductible helps to lower your premium
- Some plans have different deductible levels
- Homeowners insurance often has a deductible as a percentage, e.g. 2.5% of the home’s value
Choosing your deductible is important to get right. For example, you may want to keep your premiums as cheap as possible by taking on a high deductible. However, you will need this deductible price on hand (e.g. $1000) if you file a claim. For some, the $1000 out-of-pocket cost is too high and a $250 deductible is more realistic for their budget. Consider these important factors when deciding on a deductible:
- Your financial ability to pay the deductible in any given year
- Your risk level of filing a claim (e.g. high if you drive a lot)
- Your comfort level with paying the amount
Check out our tips on how to choose the right insurance deductible!
Want to know your best to secure the right insurance deductible? Visit Humble & Davenport Insurance, serving Renton and neighboring cities of Washington.