What is an Insurance Deductible and How Does it Work

A deductible is the portion of the cost you are responsible to pay after you file a claim. Deductibles can be found on almost all insurance policies. Once you file a claim and it has been deemed a covered loss, you will be paid for the repairs of that loss minus the deductible you have chosen. For example, in an auto claim, the insurance company will give you a check for the repairs of your car minus the deductible amount. You will then give the auto body shop the money from the insurance company and your deductible, which will equal the total amount of damage to the vehicle.

When choosing a deductible there are 2 things to consider before doing so. The amount of the deductible is very important because this will determine how much you are responsible to pay in the event of a loss.  Losses’ happen at the most inopportune time so chose a deductible you can ‘scrap together’ at a moment’s notice as you’ll have to pay the deductible to have the repairs completed.

The amount of the deductible will also influence your premium. The higher the deductible, the less the policy costs.  The lower your deductible, the higher the policy cost.  Studies show that choosing a higher deductible leads to saving money over time.

Finally, it is important to realize that deductibles can vary for different types of losses (peril) on a home insurance policy. Specifically, you may have a deductible for just wind and hail losses while having another for all other types of losses. Insurance companies do this when a loss, like wind and hail, is prevalent in an area.

We always encourage clients to carry ‘the highest deductible amount you can easily afford’ You may never have to file a claim and never pay the deductible. …but you always must pay the monthly/yearly cost of the policy.

Note: Data and information provided on this site is for informational purposes only and should not be considered professional advice. Denver West Insurance Brokers makes no representations as to accuracy, or validity of any information on this site and will not be liable for any errors, omissions, losses, injuries, or damages arising from its display or use.