We hear this word all the time, “deductible.” Commercials usually shout at us about how low theirs are, or that it vanishes sometimes, but not all deductibles are the same, particularly across different types of insurance. A deductible is the amount you’re required to pay before your insurer comes in and handles the rest. If you have policies for your home, vehicle and or health insurance, you know that you pay different premiums, one to keep each plan active, but you also have a different deductible attached to each plan, and they work differently.
The deductible for your auto insurance is per claim. This means that if it’s $1,000, you’ll need to pay this amount each time before your insurer begins paying. So, if your vehicle is hit and $800 worth of damage is done, your insurance will not pay for any part of it. If you were to then have another accident totaling $1,200 worth of damage, your insurance company would cover you, but only for the $200 over your deductible.
The deductible for your health insurance is not per claim, but per year. This means that if you have a $2,000 deductible, your insurance will begin paying after you have cumulatively spent this amount. Let’s say you spend $500 on a medical bill. Your deductible now has $1,500 remaining for the year. If you were to then receive an $1800 medical bill, you would be responsible for $1,500 while your insurance would pay the remaining $300. Following this, your insurance will pay for all covered medical expenses for the year. While health insurance is often purchased through your employer as a part of your benefits package, you may have the opportunity to choose a plan with a deductible that works best for you and your financial situation.
Your home insurance deductible works per claim, just like your auto insurance.
Once you know how each type of deductible works, you can go about choosing ones that work for you. When choosing a deductible, you’re signing up to be responsible for a portion of risk. That risk (your deductible) informs how much you pay. The higher the risk means the lower your premium, or monthly rate is, and the lower your risk, the higher your premium. It comes down whether you’d prefer a cheaper monthly payment with higher risk, or a higher monthly payment with less risk. This will depend on your situation and will be different from auto to health to home insurance. Do some research, talk to an agent, and decide on the appropriate deductibles for you. Get started today by contacting us using the form below.
Senior Vice President | Partner
Ryan O’Connell is a Partner and Senior Vice President at RogersGray with a focus on personal insurance, specializing in coastal property risks and complex personal insurance needs for investors and second homeowners.
Named as an Affiliate Member of the year by Cape Cod and Island Realtors Association in 2018, Ryan also volunteers with Housing Assistance Corporation and the Community Development Partnership, where he teaches first time home buyers on how to understand insurance and how to find the right insurance policy for their needs. You can connect with Ryan via LinkedIn or by email.