Most people understand that deductibles refer to the amount you’d pay out of pocket in the event of a claim, but there’s more to them than just that.
There are some finer points about why deductibles exist in the first place, and when it might apply. Do you know how to choose the right deductible amount? If not, you’ve come to the right place.
Why have a deductible anyways?
Insurance is there to cover risks that you would not normally be able to cover. The deductible is there to avoid fraudulent or frivolous claims, allowing the insurer to keep premiums low. It’s a sign of good faith that you are sharing the risk with the insurer.
What is a deductible exactly?
When a claim arises, the deductible is the amount paid out by the insured before the insurer covers the remaining cost. The amount of the deductible depends on the type of policy or coverage, but it is usually either a percentage or a set dollar amount.
EXAMPLE: Imagine a scenario where you suffer damages that your home insurance policy covers. Any of the resulting expenses that are below the deductible amount are your responsibility. Any expenses over that amount is the responsibility of the insurer. So if the damage caused by the insured risk is $8,000 and you chose a $1,000 deductible, you would pay the deductible and your insurer would pay the remaining $7,000.
When does the deductible kick in?
On a normal home insurance policy, your deductible applies in nearly every case for property loss or damage. But there are some instances where you may not have to pay a deductible. Some insurers waive a deductible if the claim is above a certain amount.
Do you have more questions? Don’t hesitate to reach out. And if you’d like to apply for a home, tenant or condo insurance quote, you can use our easy online form.