If you’ve ever filed a claim you probably notice that your check did not include the entire amount of the damages. It is because almost all insurance policies really have a deductible. A deductible is usually a fixed amount that you have to pay using out-of-pocket money. After paying that’s when the insurance will cover the remaining expenses.
Deductible in insurance in simple words is a sum of money that you need to pay before your insurance plans kicks in. It always depends on the insurance plan you have. After paying the deductible, the costs are usually lower for covered services. It’s because of the copayments and coinsurance, until it reaches the out-of-pocket maximum.
For example, If you purchase a plan with a $2,700 deductible, you need to pay $2,700 first for your medical expenses. If you meet the deductible, your plan will start paying some of its share of expenses. The deductible can range from 0 up to thousands of dollars. Take note that it can be paid “per injury / per condition” or per certificate period.
Take note that the higher the deductible is the lower the premium is. On the other hand, if you select a lower deductible, then you will pay less out-of-pocket. But the overall cost of your premium can be higher. Always make sure that it’s appropriate for your circumstances when choosing a deductible .
If you file a claim that is covered by your policy, you need to pay a deductible first this is to help prepare or replace the damages.
How does deductible in insurance really work?
Sometimes deductibles are flexible as it allows you to choose it. You can decide if you want a $250, $500, $1,000 or $1,500 deductible. Sometimes even more, sometimes less. Auto insurance is a really good example for this topic. Let’s say you had a little car accident. The amount of damage in your car is $4,000 and you have $2,000 deductible. The insurance company will pay $2,000 for the damages.
Take note that some deductibles are calculated using the percentage of the value of the covered property. An example of this is homeowners insurance. Usually in home insurance, it has a 1% deductible on the value of a house. So, let’s say a $250,000 house will have a $2,500 deductible.
So, at some point when you buy insurance. You’re becoming the company’s partner rather than its client at some point.
Why do deductible in insurance exist?
Well, deductible in insurance exists because insurance companies are making sure that you are going to use your policy properly. Let’s say a $500 auto insurance deductible keeps you from filing a claim every time your car gets a little scratch. $400 health insurance keeps you from going to a clinic every time you bump your toe.
In other words, it’s low enough that you can afford it for major problems. But high enough that it doesn’t make any sense to use it for minor things.
Topic Takeaways:
Some plans provide some services “outside” the deductible. For instance, they might pick up part of the cost of a few primary care doctor visits a year even before you’ve spent to the limit of your deductible. The only way to figure out how a particular plan handles deductibles is to look at the coverage details. And of course all plans cover preventive services with no deductible or out-of-pocket costs at all.
Keep in mind, you may have to pay deductible before your coverage kicks in. Always remember, each coverage type has a different limit. There are different types of limit, and split is one of them. To know more about this topic you can visit simple explanation of split limit coverage.