What is a deductible?
A deductible is the amount of your own money you are willing to pay toward any claims you file. A deductible is “first dollar” coverage, which means you would pay your deductible first before the insurance company contributed any dollars to your claim. Deductibles can range from $250 to $10,000.
How does a deductible work?
Think of a deductible as a partnership between you and the insurance company. Let’s assume you carry a $1,000 deductible on your homeowner’s policy. If you have a fire loss that totals $25,000 in damage, you would pay the first $1,000 and the insurance company would pay the remaining $24,000.
How do I pick the right deductible?
Let’s start off by clarifying that there is no “right” deductible for everyone. When deciding on the best deductible for you, you should consider the following:
- Typically, the higher the deductible, the lower the premium, and vice versa
- Filing a claim will almost always have an adverse effect on your premiums. A larger deductible will help prevent you from making small claims that don’t make economic sense to file
- You will want a deductible you can comfortably afford to pay and that makes sense for your financial situation
Your agent should be able to run a few different scenarios for you to demonstrate the savings potential between various deductible options.