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Understanding Your Deductible

Understanding Your Deductible

The insurance deductible is one of the more confusing aspects of the subject. Understanding a deductible and its workings can help consumers make informed choices when buying insurance or filing claims.

A deductible is simply the amount that an insured person has to pay before the insurance company will cover their expenses. If you have health insurance with a $1,000 deductible and receive a $2,000 medical bill, you will be responsible for the first $1,000, and your insurance will cover the rest.

Deductibles vary greatly depending on factors such as the type of policy, level of coverage and others. Liability insurance may not include a deductible. Some insurance policies, like auto insurance or homeowners insurance, have a higher premium in exchange for a lower deductible.

Note that deductibles are only applicable to expenses covered by the insurance policy. A particular expense that is not covered under the insurance policy cannot be used to reduce the deductible. Deductibles are usually reset at the beginning of each policy period. If you have an annual health insurance deductible of $2,000 you’ll need to pay this amount every year before the insurance will cover expenses.

How does my deductible affect my policy rates

It is crucial to understand your insurance deductible because it will have a major impact on the amount of money you’ll be required to pay out-of-pocket. Insurance policies with lower deductibles usually have higher monthly premiums. If you choose a higher deductible you can save on premiums, but you will have to pay more if there is a need to make a claim.

It’s crucial to take into account your personal circumstances and financial status when choosing an insurance plan. You may choose a policy with a low deductible if you suffer from a chronic condition that requires frequent doctor visits. This will help you manage your out of pocket expenses. If you lead a healthy life and don’t need much medical attention, you can save money by selecting a policy that has a higher deductible.

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What are the benefits of raising my deductible amount?

Raising your deductible can lower your insurance premiums, whether it is for your auto policy, your renter’s policy, or your homeowner’s coverage. Remember that your savings will depend on a number of factors.

Savings can be substantial when it comes to insurance for your home. According to this New York Times article, raising the home insurance deductible by $500 up to $2,000 can save you as much as 20% of the premium.

You can also call your local insurance agent to discuss your potential savings.

Should I increase my deductible?

It depends on your financial situation and that of your family. You can raise your deductible up to $1,000 if you have a large emergency fund. (Experts recommend that you save at least two full months of living expenses.) This will reduce your insurance costs. If you can avoid filing a claim for a period of two, three or four years, you will save money in the long run. FYI, the average car driver drives for an average of 8.3 years before filing a claim. Owners of SUVs and pickup trucks file claims every 6.5 to 7 years.

Can I increase my deductible anytime?

It depends on the type of insurance policy we are talking about. If it’s an auto policy, then yes. You can also change the terms at any time. If it’s your health insurance, then you may have to wait until it’s open season. Exceptions exist for life events. Your homeowners policy can typically be changed at any time.

We recommend that you re-evaluate this number every year, and all other factors, including your insurance plan, before renewing your policy.

Final thoughts

Understanding the types of deductibles included in your policy is crucial. Some policies have different deductibles, for example, collision and comprehensive coverage on auto insurance. Some policies have a deductible that is based on a percentage, meaning the amount of the deductible is calculated based on the cost of the claim.

It’s also important to understand what expenses your insurance covers and which ones aren’t. You may be able to reduce your out-of-pocket expenses in some cases by using preventative services or providers within the network.

Understanding your insurance deductible will help you manage your insurance costs and coverage. You can make more informed decisions about your insurance policy by taking the time necessary to fully understand it and your personal circumstances. Speak to your insurance provider or an insurance broker if you have any questions or concerns regarding your insurance coverage.