How Insurance Deductibles Work
Whether you're new to insurance or getting ready to switch plans, you've probably heard the term "deductibles" before but may not fully understand what it means or how it works.
A deductible is the amount of your own money you must contribute to an insured loss before your insurance company begins to compensate you.
To put it another way, deductibles are deducted from your payment before you receive it if a disaster strikes your home or you are in a car accident. It essentially involves sharing risks. You are agreeing to bear a portion of the financial burden following an insurance claim.
Depending on your plan type, your deductible may be high or low. The deductible you select has a direct impact on your premium and up-front costs, making it an important consideration when comparing insurance policies.
A deductible typically consists of a fixed dollar amount or a fixed percentage of the total insurance coverage provided by the policy. If you file a claim and your insurer approves it, you'll pay the amount specified in your policy, and your insurer will take it from there.
However, in cases where your insurer refuses to do their own part by giving you all the support you need to recover your loss, you're advised to seek the help of an attorney.
At Voss Law Firm here in Texas, Our team of experienced attorneys will help you get your insurance company to cooperate and make sure you get the full benefits you deserve. Just reach out to us at 1-888-614-7730 for a free consultation.
Now, you may not understand how insurance deductibles work. That's why we have taken it upon ourselves to show how they work. Let's quickly dive into it.
How Do Insurance Deductibles Work?
Deductibles for insurance operate in various ways. It is determined by the type of insurance policy you have. Each insurance policy has its own terms and conditions, and the policy will specify your insurance deductibles.
The thing is, once you understand how insurance deductibles work, they are actually pretty simple. If you have a set deductible, it will be deducted from your claim payment in that amount. Auto, homeowners, and renters insurance policies apply a deductible amount to each and every claim you make in a given year.
For example, suppose your insurance policy only has a $3000 deductible and you wake up one day to the thumping sound of hail on your roof and discover that hail has caused damage to your roof. If your insurance adjuster inspects the damage and determines it is worth $6000, your insurance company will send you a check for $3000, which equals $6000 minus your deductible.
Note that, a percentage of the insured value of the home is used to determine percentage deductibles, which are typically only applicable to homeowners.
Types Of Insurance Deductibles And How They Work
• Health Insurance Deductible
Contrary to homeowners insurance deductibles, which are determined as a percentage of the insured value of the home, health insurance does not operate that way.
The deductible, rather than being applied to each claim individually, represents the total amount you must pay out of pocket each year for the cost of covered services and procedures.
For example, suppose your health insurance plan has a $2000 deductible and a $4000 out-of-pocket payment. If you have surgery and your hospital bills total $7000, you are only liable for the first $2000.
This is due to the fact that you have health insurance. In these circumstances, your health insurance will share the costs with you up until your out-of-pocket maximum ($4000) has been paid. This means the deductible in health insurance can be spread out over the course of the year.
• Auto Insurance Deductibles
There are two different kinds of auto insurance deductibles. The first one is a collision deductible. It is the amount of money you agree to put aside to repair or replace your car with the remaining costs being covered by your insurance company.
For example, if a person has a $1000 deductible and is involved in an accident that results in $6000 in damages, they would be responsible for the first $1000 of those damages, with the insurance company covering the remaining $5000.
You see, the higher the deductible, the lower the premium, but the policyholder must pay more out of pocket if they are involved in an accident.
The comprehensive deductible is the second type of auto insurance deductible.
It is the amount you pay out of pocket to repair or replace your vehicle after your claim has been approved. The remaining approved costs are covered by your insurance company. This only applies to damage that wasn't brought on by a collision with another car, such as damage from a storm, theft, vandalism, or animal attacks.
When choosing a deductible, policyholders should take into account their own financial situation and driving habits. This is because a higher deductible can result in significant premium savings but greater financial exposure in the event of an accident.
• Renters Insurance Deductibles
Renters insurance is a type of insurance that safeguards the personal belongings of people who rent a house or apartment. A renters insurance deductible is the amount of money that the policyholder is required to pay before their insurance coverage kicks in in the event of a covered loss.
Depending on the policy, many of the common perils, such as theft, fire, bodily injury, and loss of use, are also covered by renters' insurance. But keep in mind that deductibles are not always included in renters' insurance policies, and even when they are, they can differ from one policy to the other.
• Home Insurance Deductibles
A deductible is required for losses to the house and its properties brought on by perils such as fire, wind, hail, theft, and some forms of water damage.
When purchasing a homeowners insurance policy, the policyholder typically chooses the deductible amount which is in different ranges. There are various deductible options available from some insurance companies including $500, $1000, and $2000 in some cases.
Higher deductibles can lower insurance premiums, but they also increase the amount of money the policyholder will need to pay out of pocket in the event of a covered loss.
Hail and wind damage caused by storms and hurricanes is typically covered by homeowners' insurance but a separate policy must be purchased for earthquake and flood damage. Some risks may have their own deductibles:
Hurricanes
When a hurricane is the primary cause of damage, homeowners insurance claims may be subject to special deductibles. Depending on the company, this will typically be a percentage-based value between 1% and 10%.
Wind
This is similar to hurricanes as it is most often measured in percentages, typically between 1% and 5%.
Depending on where you live, the percentage deductibles for earthquakes range from 2% to 20% of the replacement cost of your home.
Flood
The deductibles for flood insurance vary by state. According to the Federal Emergency Management Agency (FEMA), which is in charge of the NFIP, flood insurance typically has two deductibles: one for the building itself and one for its properties. They cost between $1,000 and $10,000.
When To Contact Our Texas-Based Attorneys
As we already mentioned, Insurance deductibles require you to pay part of the cost of the damage while your insurance company covers the rest.
But if your insurer starts playing tricks on you and wants you to pay for the damages alone, don't let that happen.
Quickly contact our experienced attorneys at Voss Law Firm and we will fight for you till you get every benefit you deserve. Call 1-888-614-7730 today for a free consultation.
