In this article, we’ll explore what a deductible is, how they work and key aspects to keep in mind. You’ll also learn about how deductibles affect your premium.
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Before you purchase an insurance policy, you’ll be asked to set a deductible. If you’re a first-time insurance buyer, the word ‘deductible’ is an important term to know. In this article, we’ll explore what a deductible is, how they work and key aspects to keep in mind. You’ll also learn about how deductibles affect your premium.
A deductible is your up-front contribution to a claim that is factored into what insurance will pay out. When you file an insurance claim, your insurance company pays for most of the cost. But before they contribute, your deductible is subtracted from the payout amount. Most insurance policies, including home and auto, require a deductible.
Once you have filed a claim with your insurer and it has been approved, the company will reimburse you for the loss, minus the cost of your deductible. For example, say your deductible is $1,000, and your claim gets approved for $10,000. You would have to pay the $1,000 out-of-pocket for repairs, and the insurance company would write you a check for the remaining $9,000.
For home and auto insurance, deductibles only apply to physical damage. There is no deductible required if you’re filing a liability claim. Each time you file a property damage claim, you’ll pay the deductible (with a few exceptions).
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