What is an insurance deductible?

What is an insurance deductible?

More often than not, our clients are surprised when they are the victim of an accident and still have to pay some money out of their own pocket. The reason for this is usually their insurance deductible.

“Deductible” defined:
A deductible is an amount of money that you yourself are responsible for paying toward an insured loss. When a disaster strikes your home or you have a car accident, the amount of the deductible is subtracted, or “deducted,” from your claim payment from the insurance company.

Deductibles are the way in which a risk is shared between you and your insurance company. Generally speaking, the larger the deductible, the less you pay in premiums for an insurance policy. So it is a way to save money on your insurance payments each month, but you MUST be prepared to pay that deductible amount if and when a disaster strikes.

A deductible can be either a specific dollar amount or a percentage of the total amount of insurance on a policy. The amount is established by the terms of your coverage and can be found on the declarations or front page of your insurance policy.

Keep in mind that for auto and home insurance, the deductible amount applies each time you file a claim. So you will have to pay that deductible for each accident or incident at your home.

Deductibles generally apply to property damage, not to the liability portion of homeowners or auto insurance policies. To use a homeowners policy example, a deductible would apply to property damaged in a rogue outdoor grill fire, but there would be no deductible against the liability portion of the policy if a burned guest made a medical claim or sued.

When you are looking to cut the cost of your insurance premium, the fastest way is to raise the amount of your deductible. We urge our clients to be careful when making this choice. Remember that in the event of a loss you will be responsible for that deductible, so make sure that you’re comfortable with the amount. If you can’t easily pay the first $500 or $1,000 of any accident or incident, don’t choose a high deductible.

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