Insurance Deductible Explained

An insurance deductible is the amount of money that a policyholder is required to pay out-of-pocket before their insurance coverage kicks in. For example, if you have a car accident and the damages are $2,000, and your deductible is $500, you will be required to pay the first $500, and your insurance will cover the remaining $1,500.

Deductibles are typically used in insurance policies to reduce the risk for the insurance company and to lower the cost of premiums for policyholders. By requiring policyholders to pay a portion of the damages or losses out-of-pocket, insurance companies are able to reduce the number of small claims they have to pay, which helps keep premiums lower.

Policyholders can usually choose their deductible amount when purchasing an insurance policy, and higher deductibles typically result in lower premiums, while lower deductibles result in higher premiums. It is important to choose a deductible that you can afford to pay in the event of a claim, while also considering the overall cost of your insurance premiums.

Overall, the concept of an insurance deductible is an important aspect of insurance policies, and it is important to understand how deductibles work and how they may affect your coverage and premiums.