Deductibles and How They WorkIf you are a homeowner or an owner/operator of a vehicle, you know that protection for these things is essential, so choosing the right type of insurance is key.  But what about a deductible?  This is what may be confusing to people where insurance is involved.  Find out about deductibles and how they work so you can avoid confusion and understand how deductibles are beneficial.

What is a Deductible?

A deductible is defined as the amount of money you agree to absorb (out of pocket) for a covered loss before your insurer agrees to pay their portion of the claim payment.  For example, let’s say a tree branch falls on your car during severe weather, causing damage to your auto.  If your deductible under your auto insurance policy is $250 and the estimate to repair your car is $2000, your share of the claim is the $250 while the insurer’s responsibility is the remaining $1750.

Typically, deductibles for home, auto, boat, etc. apply per incident, whereas a life insurance policy is typically applied on a yearly basis.  However, there are certain situations where deductibles may be waived or varied depending on certain policy provisions, multiple coverages that may apply to the loss, or a certain dollar value that has been reached.  For any further information, it is recommended you contact your local N.Y. independent insurance agent for clarification or specifics and how it relates to your insurance policy.

How Deductibles Can Save You Money

When the word “deductible” comes up, many people get exasperated for having to pay an insurance premium and still having to pay some amount “out of pocket” when a loss does happen.  But what they don’t understand is how deductibles can save you money.  Below are two ways a deductible can save you money:

  • Having a deductible helps to deter smaller claims such as a small scratch or dent. Imagine if an insurance company had to process and pay for ALL claims regardless of the amount.  Not only would the insurance company have to hire many more employees, but it would also drive up the cost of your insurance premium.  Typically, insurance is designed for catastrophic losses or losses you simply can’t afford to pay out of your own pocket.
  • By agreeing to absorb some cost of the claim payment, you are more likely to be careful, attentive, and mindful of risks that may lead to a loss. Also, it acts to prevent fraudulent claims.  Without deductibles, there are those people who may be tempted to damage their own property to pocket money or act recklessly.  This of course would drive up insurance costs for everyone if the insurance company paid anything and everything that was submitted.

Is Your Current Deductible Right for You?

The best way to figure out if your current deductible is right for you is to ask yourself whether you can afford to pay that amount “out of pocket” should a covered loss happen today.  Keep in mind that the higher your deductible, the lower your insurance will most likely be and the lower the deductible, the higher it will be.  Figure out if you do submit a claim, which suits your budget financially.

If you have any questions about deductibles and how they work or if you need assistance in choosing the right deductible for you, contact us today at 845-627-2130 and we will assist you with all your insurance needs.