Everyone wants to save money on their insurance premiums. No matter which type of insurance you have, from standard homeowner’s policies to those that cover your personal vehicles, you want to pay as little as possible per month in order to fit your premiums into your budget. If you own a business, then the stakes are higher, as well as the number of insurance plans that you hold. Once again, your expenses need to be reasonable, so it makes sense to find methods of lowering those premiums.
While insurance companies tend to offer discounts for things like multiple policies and membership in certain organizations, one of the most common ways to lower your premium involves your deductible. Raising it can indeed lower your insurance premiums, but it comes at a cost. The question is – is it worth it for you?
What Is a Deductible?
Insurance deductibles are more than just those “adult vocabulary words” that you need to know the meaning of. They play a crucial role in your insurance policies and premiums (more on that coming up), and you need to fully understand the “ins and outs” of them.
An insurance deductible is the amount of money that you agree to pay out of pocket towards your insurance claims. With some types of insurance, this amount is a percentage. For example, homeowner’s and business insurance policies often require you to pay a deductible of between five and 15 percent. With personal vehicle insurance, you usually choose a whole amount as your deductible, such as $500 or $2,000.
The Role the Deductible Plays in Claims
Your deductible is more than an amount; it’s also a promise to the insurance company that you are able to shoulder some of the cost of a claim. For example, if you get into a car accident with full insurance and are found to be at fault, your insurance will cover the cost of the other person’s repairs, medical bills, and more. You often won’t have to pay anything towards this, as long as the accident is minor. However, if you want to get your car fixed after the accident, your insurance will pay for the repairs, minus the amount of your deductible. So, if your deductible is $500, the insurance will cover everything but that amount.
Should You Lower Your Deductible?
A deductible is like a promise. Your insurance company will reward you with lower premiums if you agree to have a higher deductible, since you’ll be paying more out of pocket for a claim. There are some positives and negatives about this, as you need to have the money on hand to pay your deductible should something happen. So, it’s important to find the right balance between a deductible and your premiums.
Questions About Your Insurance Premiums or Deductibles?
If you want to know more about your insurance policies and what goes into pricing your premiums, including the role of your deductible, contact Spivey Insurance. Our knowledgeable agents can answer your questions, make sure that your premiums are affordable, and help you find the right deductible limit for your budget and needs.