What is an Insurance Deductible?
Many people wonder, “What is an insurance deductible?” Most insurance policies including property insurance, health insurance, auto insurance, property insurance, small business insurance and home insurance contain clauses pertaining to deductibles. A deductible may be defined as the amount you must pay upfront before the carriers pay you for the loss covered.
What does High Deductible Mean?
As a rule, insurance policies that contain higher deductibles will carry lower premiums. Most people will unthinkingly opt for an insurance policy with a low deductible little realizing this approach may not be cost-effective in the long run. You must do a bit of pre-study and exercise caution before selecting a policy with a reduced monthly premium and having a higher deductible. If you opt for this type of an insurance plan, you will end up paying a higher deductible only if an accident takes place.
Reasons of Insurance Deductible
As most of us are aware, the purpose of insurance deductibles is to discourage petty claims and to make premiums less costly. Co-insurance is also another common method for making premiums affordable as the insured will have to share a portion of the cost.
It is also a fact that most individuals and businesses will be able to bear small losses without the need for insurance coverage. Thus insurance companies can concentrate on covering bigger and more catastrophic losses that could financially cripple the individual or a business venture that is uninsured.
Of course, life insurance policies do not entail deductibles as there cannot be any small claims with regard to death which is grim and irreparable. Liability insurance is also free from deductible for the simple reason all liability claims will invariably be for significant sums of money.
Property Insurance Deductibles
The next question many wonder is, “What is an insurace deductible as it relates to property insurance?” Property insurance has two different types of deductibles: straight insurance deductibles and aggregate insurance deductibles.
The straight insurance deductible applies to every separate loss, and thus the type used in all matters of personal insurance. To illustrate, assuming during the same year, you met with two or three different car accidents, then the deductible will apply separately for each of the accident.
Aggregate deductible often apply to commercial insurance policy, which is in the nature of total deductible for a policy period. An aggregate deductible is appropriate for commercial insurance, as business ventures can sustain several separate losses during a given year.
Health Insurance Deductibles
Most health insurance policies carry a money deductible, except the disability insurance that has a time-period deductible – which means the insured must wait for a specific period of time to claim any insurance.
A high deductible health insurance is a type of health plan with low premium accompanied by a high deductible for serious medical treatment that entails hospitalization or surgery.
Car Insurance Deductibles
A deductible in car insurance is the amount of money you will be required to pay when your car meets with an accident - regardless whether it is your fault or not. Some insurance companies may exempt deductible if the other party’s insurance company consents to reimburse the money. Nonetheless, it is safer to opt for a deductible that you can afford in case it becomes necessary.
A deductible is an integral feature of most health or auto insurance policy and even property insurance, home insurance, small business insurance contains deductibles.
Therefore when buying an insurance policy, make sure to ascertain details about the deductibles. A significantly low premium rate may mean a high deductible. Attempt to strike a balance between affordable premiums and a reasonable deductible when purchasing an insurance policy.
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