How to Understanding the Deductible in Insurance Policy

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Understanding the Deductible in Your Insurance
Policy

• Brown OHaver

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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.
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She was surprised that she had that ten percent
deductible and 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.
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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
difference 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 let's 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.
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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, the insurer will pay you
100,000.00. Many insureds and some claim
representatives do not understand this but 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.