What’s on your to-do list this February? Whether it’s planning the ultimate Valentine’s Day date for a loved one, buying more salt for your sidewalk, or counting the days until spring, your insurance deductible may not rank high on your list. However, did you know that your deductible’s value influences your monthly insurance premium?
That’s right—by taking an interest in the deductible amount on your home, car, or commercial insurance policies, you can gain a better understanding about deductibles, including why insurance deductibles exist, how they mitigate risk for both the insured and the insurance companies, and how they affect your premiums! Keep reading to learn more about insurance deductibles!
Getting to Know Deductibles
Let’s look at some of the common concerns that insurance clients have about deductibles:
What is a Deductible?
First, let’s start with the basics! An insurance deductible represents the total amount of money that the insured (you!), will pay on an insurance claim. Imagine that you’ve just bought a brand-new car-- you also purchased a car insurance policy with a $500 deductible. That $500 deductible means that, when it comes to all car-related insurance claims, you’ll pay for any claims that are less than, or equal to, $500. Anything over the deductible amount will be paid by your insurance provider.
For example, if you find yourself in a little fender bender with damages totaling $1,500, you’ll pay the first $500 dollars, while your insurer will cover the additional $1000. Keep in mind that, while most insurance companies will ask you to choose a dollar amount, some will ask you to select a percentage for your deductible.
Why does a deductible matter?
Some clients might wonder why they need a deductible in the first place—after all, isn’t it the insurance company’s job to pay for damages to your property? A deductible works in several ways to protect not only the insured, but also the insurance company, too:
- Your deductible entitles you to more money: so long as you agree to pay a certain amount, you’ll protect yourself from huge, out-of-pocket expenses that may arise.
- You’re only responsible for paying that deductible when you file a claim—if you never file a claim, you won’t need to pay your policy’s deductible.
- An insurance deductible helps to protect the insurance company from paying every single claim that is filed. When a policy holder agrees to pay a certain amount of their claim, this ensures continued financial security for both the company and its policyholders.
How Does the Deductible You Choose Affect Your Insurance Premiums?
Whether you’ve opted to choose a lower deductible or are comfortable with paying out a little bit more, the deductible you choose can affect your insurance premium.
A lower deductible will increase your premium, while a higher deductible will result in lower monthly payments. However, some policies have a minimum payment that policyholders are required to pay in the event of a claim. So, always talk to your Acumen insurance broker to select a policy and deductible that suits your financial needs and lifestyle.
What Deductible is Right for You?
Once you understand what a deductible is, and how much you’re comfortable paying, you can work with your insurance broker to help lower your monthly premiums or find a deductible that suits your current lifestyle. Contact your Acumen insurance broker today to discuss your deductible!