What is a deductible?
Insurance companies and agents sometimes have a bad habit of using insurance terms and assuming that everyone else knows what they mean. One such insurance term is “deductible”. You may have heard the term when you purchased your insurance policy or if you had a claim. So, what exactly is a deductible? A deductible is the amount of expenses that an insured must pay out of pocket before the insurance company will pay anything.
Here are a couple of examples to help you understand:
If your roof sustains $2,000 worth of damages during a severe snowstorm and your home insurance deductible is $500, you will be responsible to pay the first $500 and the insurance company will pay the remainder of the repair costs, which in this case would be $1,500.
If you are involved in a car accident and your bumper needs to be replaced for a total cost of $750 and your auto insurance deductible is $1000, unfortunately, since the cost to repair your car is less than your deductible, your insurance company will not pay for the damages. You will be responsible to pay out-of-pocket for the new bumper.
A deductible on your policy helps reduce the cost of insurance. The higher the deductible, the lower the premium will be. Conversely, with a lower deductible, the premium will be more. A lower deductible means that the insurance company is assuming a bigger responsibility in the event of a loss which is why the premium decreases if you increase your deductible and assume a larger portion of the claim yourself.
If you have any questions regarding your deductible or would like us to review your policy, give us a call at (401) 723-8510 or visit us online.
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