Understanding Insurance Deductibles: What You Need to Know

When shopping for insurance whether it's auto, home, health, or another type, one term you’ll see over and over again is “deductible.” So what exactly is a deductible, and how does it impact your coverage and costs? In this post, we’ll break down what deductibles are, how they work, and how to choose the right deductible for your needs.

What Is an Insurance Deductible?

An insurance deductible is the amount of money you agree to pay out-of-pocket before your insurance company begins to cover a claim. Think of it as your share of the cost. Deductibles are designed to prevent small claims and keep insurance premiums more affordable.

For example:

If you have a $500 deductible on your auto insurance and you have a covered claim for $2,000 in repairs, you'll pay the first $500 and your insurer will cover the remaining $1,500.

How Do Deductibles Work?

The deductible amount is set when you purchase your insurance policy and usually applies per claim or per year, depending on the type of insurance.

High vs. Low Deductibles

There’s always a trade-off between your deductible and your monthly premium (the amount you pay for the policy):

• High deductible = lower monthly premium.

• Low deductible = higher monthly premium.

Choosing the right balance depends on your financial situation and risk tolerance.

How to Choose the Right Deductible

Here’s how to evaluate what works best for you:

1. Auto Insurance

• High deductible: Good if you’re a safe driver, don’t drive often, or can afford to pay out-of-pocket in case of an accident (budgeter's, we see you!).

• Low deductible: Ideal if you drive frequently or would struggle to cover a big expense unexpectedly.

  
  

2. Homeowners Insurance

• Higher deductible: Consider this if you live in a low-risk area, or are unlikely to file a claim, and want to keep premiums down.

• Lower deductible: Useful if you're in a disaster-prone area or prefer peace of mind knowing more of the cost is covered.

Final Thoughts

Choosing the right deductible is about balancing risk and affordability. Ask yourself:

• Could I afford this deductible in an emergency?

• Do I prefer lower monthly payments or lower out-of-pocket expenses during a claim?

An insurance agent can help you run the numbers and understand how different deductible levels impact your premium and protection. Still have questions about your deductible options? We’re here to help. Contact us today for a personalized insurance review.

(207) 363-7894 | www.tapleyagency.com | 300 York St . PO Box 808 . York, Maine 03909