When selecting insurance, not only will you have to determine how much insurance coverage you want, you’ll also have to decide how high a deductible you’re comfortable with. A deductible is the amount you pay toward the cost of an accident or claim. Once you pay your deductible, the insurance company pays the remaining portion. For example, if you have an accident with $4000 worth of car damage, and you have a deductible of $500, you’ll be required to pay the $500 and the insurance company will pay the remaining $3500.
There are deductibles on some forms of insurance, but not all. Deductibles are seen on auto insurance, home owner’s insurance and health insurance.
To get insurance for your car, you need to meet the state’s requirements for coverage as well as your own level of comfort. You might elect to have more insurance than the minimum to offer you more protection, for example. In addition to the amount of coverage, you have the choice of deductible. Auto insurance has deductibles of $100, $250, $500, and $1,000. Choosing the right deductible is a balance between the amount you’re willing to risk having to pay in an accident and the frequency you’ll be making a claim. The amount of your deducible can greatly impact your monthly payments creating another balancing act of trying to save money in both the short-term and the long-term. .
If you have several fender benders on a regular basis or live in an area with a high number of break-ins, a low deductible will make it easier each time you call upon your insurance. If your deductible is only $100, you’ll have only that amount to pay at each claim, although your monthly statements will be higher. If you very rarely have any cause for a claim, a high deductible can save you money on your bills each month, but you’ll be out more in the event of a claim. It’s a balancing act for each insured individual.
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