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Understanding Deductibles
Answers to some commonly asked questions
What is a deductible?
A deductible is the amount you pay out of your own pocket before the insurance policy begins to pay. Deductibles apply only when your property is damaged (vehicle, home, and personal belongings). No deductible applies when your policy pays for a covered liability loss such as a claim for a slip-and-fall on your sidewalk or a dog bite.
How does a deductible affect my premium?
Auto and home insurance premiums vary depending on the amount of deductible you choose to pay. Selecting a higher deductible will decrease premiums and selecting a lower deductible will increase premiums.
Why choose a higher deductible?
- You can reduce premiums.
- Buying protection that covers you for small claims is generally not a good buy. You buy insurance to protect yourself from significant losses.
- A higher deductible lessens the chance that your eligibility with your insurance company will be affected. If you have a low deductible that causes you to submit a number of small claims, your premiums will likely increase or your coverage could be terminated.
If you have more questions about whether you should choose a higher deductible, call one of our Member Service Consultants at 1-800-279-4030.
Where does a deductible fit in?
Auto insurance
The deductible applies to the protection you buy for damage to your vehicle. These coverages are called collision and comprehensive. Some companies refer to comprehensive coverage as “other than collision.” Collision coverage reimburses you for vehicle damage caused by colliding with another vehicle or object. Comprehensive coverage reimburses you for vehicle damage caused by circumstances other than a collision, such as vandalism, hail, or fire. It also includes coverage for damages like a cracked windshield or hitting an animal.
Home insurance and renters insurance
The deductible applies when your property is damaged, whether it be your home or personal belongings. The one exception is high-valued items that are specifically insured for an additional premium or scheduled on the policy.
When you schedule property, such as jewelry, furs, silver, or collectibles, you receive additional coverage up to the amount you specify. If one of these scheduled items is damaged or stolen, you will not have to pay a deductible.
Let’s say that a fire in your home causes $10,000 worth of damage. You will be reimbursed $10,000 less your deductible. If your diamond ring is stolen and you scheduled the ring for $3,000 of coverage, your policy will reimburse you up to $3,000 and no deductible applies.
How much can I afford?
Evaluating your ability to pay the deductible is an important consideration. Even if you believe that paying a higher deductible to reduce your premium is a sound theory, a $1,000 deductible makes little sense if making this payment creates significant hardship.
What is best for me?
Buying insurance protection is very personal. You must think about what to protect, how much protection to buy, and the deductible amount that makes sense for you. Assessing your risk tolerance is critical to making these decisions. Are you more comfortable with a lower deductible, which means you will pay a higher premium but less out of your pocket if you have an accident? Or, are you confident you will have the ability to pay a higher deductible if you have a claim and would prefer lower premiums?
Protect yourself
An insurance policy for your auto, home, or personal belongings is one way to protect yourself from a catastrophic financial loss. It is a contract between you and the insurance company to share the cost if something happens to your auto or home. You share in the financial burden in two ways: by paying a deductible and by paying any amount that exceeds your coverage limits.
WMBT 2732-290-1023 (W)
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