A deductible is the amount you pay out of your own pocket before your insurance company starts paying on a claim. If you have a $1,000 deductible and file a claim for $5,000 in damage, you pay the first $1,000 and your insurer covers the remaining $4,000.
Deductibles serve two purposes. First, they keep premiums lower by ensuring you share some of the financial risk. Without deductibles, insurers would pay for every small loss, and your monthly premium would be significantly higher. Second, they discourage small or frivolous claims. If your deductible is $500, it does not make sense to file a claim for a $600 repair — the hassle and potential rate increase are not worth the $100 payout.
There is an inverse relationship between your deductible and your premium. A higher deductible means a lower premium because you are agreeing to absorb more cost before insurance kicks in. A lower deductible means a higher premium because the insurer takes on more risk. The key is finding a balance that works for your budget — both your monthly cash flow and what you could afford to pay out of pocket in an emergency.
Choose a deductible you can actually afford to pay if something happens tomorrow. A $2,500 deductible saves money on premiums, but only if you have $2,500 available when you need it. At Truscott, we help clients find the deductible that balances their budget with their risk. Request a Truscott coverage review and we will make sure your deductible works for your situation.
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