Insurance 101- Deductibles

A couple of weeks ago we discussed , and how it is vital that you have it. Part of the discussion was about what an insurer will pay out when you have a claim. The word deductible came up and I have received a few questions about deductibles. So lets discuss deductibles and how they affect you and your policies.

A deductible is the amount of money that you are agreeing to "self-insure" in the event of a loss. In the past most deductibles were a flat dollar amount. Today some insurers are implementing the option to have a percentage deductible too. Deductibles can vary from a zero dollars to several thousands of dollars.

So what deductible is right for you and your family?

One fact we need to understand is that the higher your deductible, the lower your premium will be. That is pretty straight forward. If you are willing to self-insure more, then the insurance company is covering less. But this is where some people fall into the trap of chasing lower premiums.

Yes, a $2,500 deductible will get you a lower rate. But if you can't afford your deductible in the event of a loss you are shooting yourself in the foot.

Let's say that you decide to go with a $2,500 deductible on your auto to save you money on the monthly premium. A couple of months later you get into a small accident that is your fault. The car is damaged to the point where it can't be driven. To fix the car it will cost $2,000. How much is your insurance company going to pay? The answer is nothing, your insurer will not pay a penny towards this claim because $2,000 is less than your deductible. If you can't cover the cost of the repair you will lose the use of the auto.

You want to have a deductible that is low enough that you can afford it, but high enough to take advantage of a lower premium. This is where having a personal insurance agent to review your deductibles makes a huge difference. Due to the many options to meet your insurance needs today, personal service from an experienced professional is more important than ever. Take a moment to call your personal agent and review your deductibles to make sure they are right for you and your family.

The bitterness of poor coverage lingers long after the sweet price is forgotten.

Joe Urvina is an insurance agent located in Gig Harbor, WA.
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jurvina@farmersagent.com
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(253) 858-5881