While many people may have some form of insurance, they do not always understand exactly what it really means to have a deductible. The fine print is not always clear enough, even if it states the terms in black and white. The layperson does not always read and understand legalese the way the insurance company and a lawyer might. This is especially true for those shopping for insurance and the newly insured.
Deductibles Defined
For the most part, almost any insurance plan will involve a deductible. There are of course a few exceptions, one being life insurance, however, if your insurance plan mentions a deductible, there are a few things you will need to know.
The deductible is the amount that you will have to pay out of pocket before your insurance will take over the costs. Say you have a deductible of $1000 on your car insurance. You will have to pay this much yourself before your insurance will kick in or in the event of an accident before you have fulfilled your deductible requirements, the insurance will pay you the amount of your claim minus the deductible. The exception is a claim that is less than your deductible. if your deductible has not been paid and the claim is less, the insurance company will cover nothing.
Deductible amounts will vary from insurance plan to insurance plan, but are typically in balance with the premiums being paid. If you want a plan with low to no deductible, you will have to pay a higher premium. If you want a lower premium, your deductible will be higher. You really want to pick an insurance plan that has a balance between the two that will make your policy affordable and offer reasonable coverage after the deductible has been met.
What is the Purpose?
The reasoning boils down to three things, really. For one, this is a way to encourage people to take more responsibility for themselves and what is theirs. Secondly, deductibles can reduce your premiums somewhat (and hey, any amount of savings matter these days, right?) because the insurance company will have less to pay out on claims. Finally, deductibles are also about human morality; right and wrong. having a deductible teaches responsibility, as mentioned before, reduces carelessness, and lessens the number of petty claims being made and paid out.
Now that you have a better understanding of deductibles, compare premiums and deductibles to be sure you are getting a good deal, whatever the insurance plan, and remember to pay those premiums and meet your out-of-pocket responsibility so you are guaranteed the full coverage of your plan.
