Deductibles 101

A deductible is the amount you are required to pay out of pocket when filing an insurance claim.

You probably talked about them when you first bought your insurance coverage. But if you don’t review your insurance annually, the next time you even hear the word “deductible” could be months or even years later when you’re filing a claim. And this can make an already stressful time even more puzzling.

While we don’t expect you to agonize over your deductible every day, it’s important to know how to find and understand your deductibles, as well as determine if you’re paying the correct amount for your current risk.

Find and understand your deductible. Your deductible is very easy to find. On a standard homeowners or auto insurance policy, your deductible amounts should be listed on the front page. This page is also known as the declarations page.

You may notice that your policy contains different deductible amounts for each individual coverage. For example, an auto policy includes both comprehensive and collision coverage, each with its own deductible. Collision coverage kicks in if you collide with another object. So if you got into an accident with another driver, the collision deductible will apply to your claim. Comprehensive coverage applies when the damage to your car is brought on by other causes, like if you hit a deer or if a tree falls on your vehicle. In these instances, the comprehensive deductible will apply.

Also, you may see that some coverages don’t require a deductible, like scheduled coverage for jewelry or other valuable items, as well as homeowners’ or auto liability coverage. In these cases, you won’t have to pay any out of pocket costs if you need to file a claim.

Choose a deductible that’s right for you. Deductibles also affect your rates. The higher the deductible, the lower your premium. Meaning, if you’re willing to pay more out of pocket when filing a claim, your monthly or semiannual payments will be smaller. On the flipside, if you’re willing to pay more in premium, your deductible will be reduced.

When you review your policy, your agent can help you make sure that you’re paying the right amount for your risk. For instance, if you’ve got a fairly new home, you may not have the same risks as an older house and may not be as likely to file a claim. In which case, it could be better to have a higher deductible and lower premium.

And since different coverages within your policy contain different deductibles, your premium and deductibles can become even more customized. For example, if you live in the country and are more likely to hit a deer than another car, you may want to lower your deductible for comprehensive coverage, but raise your deductible for collision coverage.

Talk to your agent. Your independent insurance agent is the best person to talk to when making these decisions. An annual review of your policy doesn’t take much time and could potentially save you money.

So give your independent agent a call for help evaluating your deductibles and ensuring that you’re paying the right amount for your current risks.

This article is for information purposes only. For specific coverage details, always refer to your policy. If the policy coverage descriptions in this article conflict with the language in the policy, the language in the policy applies.