While evaluating various insurance products, you may have come across the word “deductible” a number of times. It’s important that you understand exactly what this term means and, more importantly, how it will impact you should you need to put in a claim at some point in the future. To clear things up, we thought we’d break down the basics of insurance deductibles.
What is an insurance deductible?
The deductible associated with your insurance policy refers to the amount of money you are responsible to pay out of pocket before your insurance company pays their portion of the claim. For instance, if you were to get into a car accident that had damages totaling $1,000 and your deductible is $500, you would be responsible for the first $500, and then the insurance company would cover the remaining balance. The same goes for homeowner’s, condo or renter’s insurance policies.
What are my options?
When you are selecting your insurance products, whether for your vehicle, home or rental property, part of the process will involve choosing a deductible amount. Most deductibles range anywhere from $250 to $1,000, sometimes even more. Generally speaking, the higher the deductible, the lower your monthly, quarterly or annual premiums will be.
There is no right or wrong answer as to which insurance deductible is right for you. The key is to choose a number you feel comfortable with and would be capable of paying in the event of a claim. Other important things to consider are the risk factors associated with your lifestyle, habits, geographical location, etc. For instance, if you live in a highly congested area where fender benders are more likely to occur, choosing a lower deductible on your car insurance might be more cost-effective in the long run.
How can I ensure that I make the right choice?
Having a clear understanding of the insurance deductible definition and how these things work is really only half the battle. The most challenging part is often determining which number makes the most sense for your needs. Many people struggle with this decision because they want to keep premiums as low as possible, but also don’t want to be on the hook for a number they can’t afford if and when a claim is necessary.
The best way to ensure that you end up with the right deductible for your particular situation is to sit down with an experienced insurance agent. He or she can answer any additional questions you may have, discuss any concerns weighing on your mind and help you make a more informed decision.