What Is a Deductible and How Does It Impact My Policy?

Insurance policies are complicated contracts that include many clauses and conditions. While different types of insurance may consist of varying specifications and features, several common forms include deductibles. Understanding this key aspect of your coverage is critical, as it directly affects how much you may need to contribute toward covered losses before your insurance carrier begins to provide financial aid.

How Does a Deductible Work?

Although insurance generally exists to help you manage losses and expenses following certain incidents, that doesn’t mean you don’t have to contribute resources toward your own costs. Your deductible establishes minimum out-of-pocket amounts for which you’re responsible. Covered losses beyond this amount can then be rewarded in a payout by your insurer.

In many types of policies, such as homeowners, renters and auto insurance, you’ll need to meet your deductible for each claim you submit. For example, if your home incurs $10,000 worth of damage and you have a $2,000 deductible, your carrier could contribute $8,000 toward your expenses. Similarly, if you’re in a car accident, collision coverage can help pay to repair your car, but you’d also need to meet your deductible with your insurer potentially covering outstanding costs.

Health insurance plans also typically include a deductible; however, these function annually. This means that you may not necessarily need to contribute out of pocket for every service in a single plan year. For instance, if you have a $2,000 deductible and pay that much for a major procedure early in the year, services for the remainder of the plan year may be fully covered.

Does My Deductible Affect My Rates?

Yes, deductibles are an integral factor in determining your insurance premiums. Generally, selecting a higher deductible can help you access lower rates. However, you should be sure you can afford those out-of-pocket costs should you need to submit a claim. Alternatively, if you would prefer to pay more regularly in exchange for reduced costs at the time of a claim, you might opt for a lower deductible.

We’re Here to Help

Contact Ackerson Insurance in Charles City, IA, today to learn more about deductibles and customize your policies according to your needs and preferences.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.