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Taking on a higher deductible, or what some call "assuming more risk," can substantially reduce your insurance rates. There are many variables, of course, contingent on the size of your deductible and your insurance provider. Deductibles exist whether you are talking about personal, or commericial, or health insurance.

Deductibles Defined

For the sake of clarity, a deductible is what you pay before your insurance company provides a financial hand. If, for example, you have a $500 deductible and the estimated cost of an accident, injury, etc., is $1,400, you'd pay $500 of the bill and your provider would cover the remaining $900.

The Larger the Deductible the Lower Your Insurance Rate

You decide the amount of your deductible. Usually you'll be given a choice of increments in the amounts of $250, $500, $1,000 and sometimes $1,500. When choosing you must decide on how much risk you're willing to accept. Or, in other words, how much you can afford.

The more risk you take on, the lower your insurance rate. The difference between, say, a $250 deductible and a $1,500 deductible could, depending on your provider, be as high as 40%.

Be sure when deciding that you have the money to cover your deductible. Your insurance provider will not pay a penny toward your claim until you first pay your deductible amount.

When deciding on a deductible, please consider how much money you have in the bank in the event of an accident? If you have $749 in the bank, a $1,000 deductible won't make sense; you don't have the money to cover it. In this case you'd have to opt for either a $250 or a $500 deductible. Also consider if the money you'll save in premiums validate taking on a higher risk (deductible)?

If you're not sure whether your deductible is as high or low as you can afford right now, it's time to talk with your insurance agent.

Posted 1:13 PM

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