Understanding the Deductible in Your Insurance Policy

1
Understanding the Deductible in Your Insurance
Policy
The deductible in your insurance policy is often
misunderstood. The deductible is the amount of
money that you will have to pay out of pocket on
each claim. Some policies provide for no
deductible and others, such as some State Farm
policies, have policies that tie the deductible
to the limit of the policy.
I once assisted an insured in a 30,000.00 claim
that had a deductible of ten percent. The policy
limit was 280,000.00 so the deductible was
28,000.00 leaving the insured with just
2,000.00 to repair the damage to her home. She
was surprised that she had that ten percent
deductible and
2
frankly, there are many people like her that do
not even know what their deductible is. In order
for some insurers to remain competitive, they
structure their deductibles in order to decrease
their claim payouts. That way they can reduce
premiums. This is a good reason for insurance
consumers to check their policy for the amount of
deductible shown, or call their agent right
away. Generally, the higher the deductible the
less the premium will be. A policy with a
500.00 deductible will cost more than a policy
with a 1,000.00 deductible but sometimes the
price dierence is so small that you might just
consider the lower deductible. We must note
that the deductible only applies to the damage,
not the policy limit. For example lets use a
deductible of 1,000.00 with a 100,000 policy
limit and you have a 90,000 loss, the amount
the insurer will pay you is 89,000.00. But here
is the kicker, if your loss is 105,000, and
your deductible is 10,000, your insurer
should pay you 95,00000 because the deductible
is taken from the amount of the loss, not the
policy limit. If your loss is 110,000.00, with
a 10,000 deductible, Many insureds and
understand this but
the insurer will pay you 100,000.00. some claim
representatives do not at Brown OHaver, we
do. We will
always do our best to collect the amount your
insurer owes you for a loss. No more and no less.