Simplifying Insurance Terms: What Is a Deductible?
If you’ve ever had to file an auto insurance claim, you probably heard that you must meet your deductible first. You may have done just that but still wonder exactly what it entails. Maybe you have a vague idea about it but aren’t completely sure. If you’ve ever asked yourself, “What is a deductible? or “How does auto insurance deductible work?” then you are in the right place to find out.
What a Deductible Is and How It Works
Whether you need homeowners, auto, or pet insurance, understanding the concept of a deductible is crucial. In simple terms, it is how much money you must pay out of pocket before your coverage kicks in. Knowing how all aspects of your insurance payments work will help you choose the right option for your policy. You’ll know the answer to questions like, “Do I need a high or low deductible plan?” This is one of several common questions about auto insurance.
The Basic Concept of a Deductible in Insurance Terminology
The bottom line is that this amount of money must be satisfied for your coverage to go into effect. In other words, if you have a plan that will pay for damages to your car in the event of an accident, the deductible is the amount you must pay before the policy pays for the repairs. If your payment is $1,000 and damages are $4,500, then you will have to first pay $1,000 before your insurer will kick in the remaining $3,500.
However, some policies work slightly differently depending on the type of coverage. Additionally, the payment is only applicable to covered expenses. If you have a miscellaneous expense that is not included under your policy, you cannot use it to satisfy any part of the amount. Deductibles may restart each new policy period, depending on the type of plan and coverage.
The Essential Role of Deductibles in Your Insurance Policy
From the insurer’s perspective, this aspect of the policy helps limit covered expenses to those that are significant in cost. If an issue only costs a minimal amount to correct, a claim doesn’t need to be filed. You can take care of those issues, sometimes for less than the deductible. In this way, insurers can keep petty claims from being filed, which brings down the overall cost of your premiums.
Types of Deductibles in Various Insurance Policies
There are different types of deductibles for both health and auto policies. Auto policies have different payments for each type of coverage. For example, there will be one for comprehensive, collision, and so on. The only type of coverage that doesn’t have one is liability. This covers the cost of the other party’s damages when you are at fault. Health insurance is slightly different.
Understanding Individual and Family Deductibles
Health insurance has two separate deductibles: individual and family. An individual health plan only has one deductible for one person. When that is fulfilled, the coverage benefits are accessible at an agreed upon percentage. A family plan, however, covers multiple people. So, each time anyone in the family pays for services, it goes toward the deductible. This can add up quickly if people are getting frequent medical treatment. That is why a family plan payment is higher than an individual one.
How Do Health Insurance and Auto Insurance Deductibles Differ?
It’s important to answer, “What is an auto insurance deductible?” and “What is a health insurance deductible?” These two types of policies differ in some important ways.
For one thing, auto coverage doesn’t have an annual deductible to meet, but it comes into play every time you file a claim. It doesn’t get chipped away at by paying co-pays like you do with a health policy.
With a health coverage plan, this amount is reduced every time you pay towards covered services. Once you have paid it in full, any other medical services you obtain are covered at the agreed percentage or completely.
Striking a Balance: Choosing the Right Deductible for You
When you first sign up for an insurance plan, you may have questions about your deductible. One question may be how to select the right amount. Whether you choose a high or low one depends on what best fits your situation.
High vs. Low Deductible Plans — Which Suits You Best?
A high deductible means paying more for your auto claims or health services at the time of the incident, with the tradeoff that you’ll have a lower monthly premium.
A low-deductible plan means you won’t pay as much when you file a claim, but your monthly costs will be higher. Deciding which plan suits you best depends on your personal circumstances. If you feel you have enough savings to pay out more when you have a claim, you may be able to select the high option. However, if you are concerned about paying a higher amount when things go wrong, you may prefer a low-option plan.
Weighing the Pros and Cons of Different Deductible Amounts
You may be thinking to yourself, “What is the average auto insurance deductible?” The answer depends on whether you go with a high or low-option plan. The range for auto coverage is $100 to $1,000 or more. Health insurance deductibles average $1,735 for individuals, but a lot of factors will determine your health plan deductible.
Weighing the pros and cons of the different amounts can help you make the right decision for you and your family. Think about how much savings you have and how much you are comfortable paying for each claim. Your monthly budget is an important indicator of which type of plan to select.
There are ways to ease the pain of your insurance premiums on your wallet and bank account. One way to obtain a lower auto insurance premium is to ask about discounts and always drive safely.
Another way is to choose a high-deductible auto plan so your monthly premiums are lower, allowing you more money for other expenses. The downside of this type of plan is when you have a claim, you’ll need to put out a higher amount, which can be difficult for some people.
Find the Right Insurance Plan for You
Insurance is complicated and can be confusing to navigate. Our friendly Acceptance agents can help you understand the different terms and choose the best option for your unique situation. Learning about your choices when it comes to your insurance deductible is important for your peace of mind.
Talk to an Acceptance agent for more information about which type of auto insurance plan and deductible is right for you. Someone can go over your budgeting concerns to ensure that you get the most affordable option. Contact us by phone at (877) 405-7102. Additionally, you can visit one of our many locations. Check for an Acceptance office near you by visiting our website. If you need a fast and free quote for insurance, check us out online.
