Understanding what an insurance deductible is and how it works is an essential part of getting the most out of your home and auto insurance policies.
In the most basic sense, a deductible is the amount you pay toward an insured loss before your insurance coverage kicks in. It can either be a specific dollar amount or a percentage of the total amount of insurance on your policy.
For an example of a dollar amount deductible, let’s say your auto insurance policy has a $500 deductible. You’re in a car accident, and your insurance company determines you have an insured loss worth $5,000. That would mean your insurance company would send you a check for $4,500. You would be responsible for paying the $500 difference.
On the other hand, a percentage deductible works a little differently. Let’s say you have a your house insured for $200,000 and your insurance policy has a 2% deductible. That means $4,000 would be deducted from the amount you are reimbursed on a claim. So if you have an insured loss of $25,000, you’re insurance company would pay you $21,000.
A higher deductible can save you money
Raising your home or auto insurance deductible is one of the best ways to save money on insurance. In general the higher your deductible, the less you pay in premiums for an insurance policy.
For example, increasing your auto insurance deductible from $200 to $500 could reduce your collision and comprehensive coverage premiums by 15 to 30 percent. And raising it to $1,000 could save you up to 40 percent.
While raising your deductible now could save you money on your premiums, it also means you’ll be responsible for paying that amount toward a covered loss. So you’ll want to make sure you’re deductible is something you’d be comfortable paying.
Need help determining what you’re deductible should be? Give Burkhart Insurance Agency a call at 877-441-6106 or get a free auto insurance quote right now. Our independent agency is proud to serve the insurance needs of the entire Tri-State area, including Ohio, Kentucky, and Indiana.