If you have any sort of insurance such as auto, homeowners, or health; it is important to know what a deductible is and the amounts of your deductibles.
Short answer, a deductible is the amount of risk that you bear yourself.
For example, Jim has an auto insurance policy with collision coverage. His deductible is $500.
Jim crashes his Honda into a tree and incurs $5,000 of damages.
Jim submits a claim for $5,000 to get his car fixed. Jim's auto insurance company sends him $4,500.
If Jim had a $1,000 deductible, the insurance company would have sent him only $4,000.
Another example.
If Jim gets into a fender bender and incurs $200 in damages, the insurance company will send him nothing because the damages were less than the deductible.
When it comes to deductibles, the amount of your deductible will affect the price of your premiums.
If you have a higher deductible, you will get cheaper premiums because you are a cheaper risk.
In the case of an accident, you assume more risk. Should an accident occur, the amount of the deductible is paid by you and the insurance company pays you less money.
If you have a lower deductible, you will get more expensive premiums. You bear less risk and the insurance company bears more risk. In the case of an accident, they will pay you more money.
When you have a policy that has a deductible, you can adjust the amount of risk you want to bear by adjusting your deductibles. If you feel comfortable taking on more risk, you can save some money. If you want less risk, you have to pay a higher price for higher quality coverage.
If you feel like you are a safe driver and have a good financial position and maybe your car isn't worth very much; you might be better off increasing the deductible on your collision coverage.
This is how deductibles work for any kind of insurance policy.
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