The deductible is the amount of money you will pay out of your own pocket during a claim. After your payment, the insurance company kicks in and pays the rest. This is arguably the most important part of any policy, so it’s vital that you understand what it is, and how it affects your policy and rate.
How Is The Deductible Calculated?
Every policy has a different deductible that you are responsible for setting, so when deciding your rate, make sure to go over the different deductible options available and select the best one for you.
The lower the deductible amount (cost per claim) the higher your monthly payment will be. It makes sense, if you pay less during a claim the insurance company will charge more monthly. However, if you want to pay MORE during a claim and have a higher deductible, the insurance company will offer cheaper monthly rates.
“What Deductible is Best for Me?”
At the end of the day, selecting the deductible is a gamble, but you can make educated decisions based on your personal claims history, as well as current financial situation.
Select a Higher Deductible If:
- You feel like saving on montly expenses is important
- You have a large savings account, or “rainy-day” fund allocated for large payments or emergencies
- You are betteing that a claim will NOT happen. Drivers with excellent records, or homeowners with new roofs might consider higher deductibles
Select a Lower Deductible If:
- You believe it makes more sense to spend now, if it means avoiding higher costs in the future
- You think it would be difficult to pay for high out of pocket, emergency expenses
- You think a claim will happen.
Each Policy Type Has a Different Method for Calculating a Deductible
Deductibles for every type of policy are different, so it is important to talk to an expert in each type of policy you invest in to make sure you are getting exactly what you need.
- Auto Insurance Deductibles
- Home Insurance Deductibles