Tips

What is an Insurance Deductible & How does it work?

Have you ever received a call to buy insurance? Of Course many times right.

Whether you’re starting a business, purchasing a new car or securing your life, buying insurance can be a life saviour. There are few people who shy away from purchasing insurance, they imagine that being young, “why do I require to buy health insurance?”. Frankly speaking, no matter how well your financial status is or how healthy you’re, you surely need insurance. Because health or home insurance act as a security and safety that protects you and your dear ones when you’re running out of cash.

Hope you understand the importance of buying the insurance. Now let’s discuss insurance claiming.

If you’re planning to claim the insurance, you might be super excited. Before claiming the insurance, be aware of the loopholes. The insurance company deducts a certain amount from your final settlement. Every insurance policy has a deductible. Be it, home insurance or auto insurance, there are few deductibles.

Wondering what is an insurance deductible and how does it actually work? This article will help you.

What is an insurance deductible?

A deductible is an important feature of all insurance policies. An insurance deductible is a money that you pay to the insurance provider when you need to get your automobile repaired or pay the hospital bill. Simply put, the deductible is the amount that you need to take out from your pocket before claiming the insurance coverage. When you’ve paid the deductible to the insurer, they will start paying your final amount.

A point to remember is that not every insurance deductible is created equally. The deductible amount for auto insurance can be $15000, while health insurance might be $3000. Before signing the document, read the terms and conditions carefully. Keep an eye on deductibles and put yourself in a convenient financial position.

The amount of insurance deductible is written in two ways i.e

  • A particular dollar amount or
  • A percentage of the total insurance value

Insurance companies offer a different type of insurance policies. The deductible can vary from one policy to another. It works differently!!! Consider, if you’ve chosen car insurance, you need to pay a deductible every time you claim separately. On the other hand, if you choose a health insurance plan, all the deductibles are covered within one year. You don’t need to pay for the insurance deductible every time.

How does insurance deductible work?

Buying insurance is the best solution to protect from unexpected risk or damage. Whether it’s health insurance or automobile insurance, it gives complete peace of mind. Hoping that there is something to save you or rely on. The insurance company will offer coverage for your loss or damage. No more worries about your finances!!! But the insurer will ask you a question “How much of the loss or risk can you cover from your pocket?”

This might look like signing a deal or an agreement that you’re ready to protect as long as you can pay your own money for the risk or loss. This is nothing but an insurance deductible.

The ball is in your court!!! It completely depends on you. Take time and choose the insurance deductible wisely. Let’s consider, if you’re planning to choose a higher deductible, the risk for the insurer will be lower. Eventually, the cost of an insurance policy gets reduced.

The process of insurance deductible is simple and straightforward. If you’re planning to pay a certain amount of the claim, the insurer will offer you minimum deductibles. When you claim more from the insurance you can increase the insurance deductible. However, you need to set the value according to insurance company rules. While signing the agreement, learn and understand the insurance deductible section completely. If you’re unable to understand or have a few doubts, ask your insurer and get your doubts cleared.

Examples of the insurance deductible

A deductible is a certain amount that actually comes from your pocket when you’ve filed for the claim. Let’s discuss few examples of the insurance deductible

Homeowners insurance

As mentioned earlier, insurance policies offer two types of deductible i.e dollar value or percentage. Homeowner insurance deductible might be $500 or 3%. Deductibles for homeowners can be earthquake, tsunami, flood, hurricane and natural disaster coverage. You can track deductibles from homeowners through a powerful app here. Download the app now and save your time and make sure about safely funded deductibles.

Health insurance

Buying health insurance is important to protect you and your family. Because, the medical expenses are touching the sky, especially in private hospitals. Hospital bills can put a hole in your pocket.

Health insurance deductible can be the amount that you need to pay for the medical care covered by the insurance company before you claim. For example, if you’ve set the annual deductible for $10,000, you need to pay $10,000 at the beginning of coverage before the insurance company begins to pay for your medical bills. 

Auto-mobile insurance

People say buying auto insurance is important. But why? Auto mobile insurance protects your automobile (car, bike, etc) from the accident. Also, protect you from medical expenses. When you don’t have auto insurance, you end up paying thousands of dollars for injuries and damages.

It’s no surprise health insurance provides an annual deductible. But this is not the case with auto insurance. It means you need to pay auto insurance deductible whenever you file a claim. Whether you file a claim one time or ten times, you need to pay the deductible every time. Car insurance deductible typically ranges from $100 – $2,500. You’ve set a deductible value of $500 for the auto insurance coverage. Repairing your car will cost $5,000. You need to pay $500 at the beginning of the claim, your insurer will pay for the remaining amount i.e $4,500.

Wrapping up

Choosing the insurance policy with the right deductible level is not an easy task. However, it’s wise to have a better understanding and knowledge of your deductible. When you have a clear idea about the deductible, you can differentiate between high premium plans and high out-of-pocket costs. Adjust the deductibles according to your situation and requirement. If you realised a high premium can save your money, then opt for it. If you still have questions about the insurance deductible, give a call to the insurer. They will help you while adjusting your insurance deductible.