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Insurance Deductibles: How They Work

Insurance Basics

What is an Insurance Deductible?

An insurance deductible is the amount you, the insured, must pay before any claim is paid by your insurance carrier. Depending upon the type of insurance, a policy may set the amount of deductible, or offer you the ability to select a deductible amount.

You’ve probably seen a deductible on your home and auto policy. If you have a recreational vehicle, boat, or motorcycle, you likely have a deductible on those items as well. If you’re a business owner, most of the assets you insure will also have a deductible. Depending on your class of business, you may see a Property Damage Deductible on your General Liability policy.

Deductibles can serve a dual purpose. They save the insurance company money (including the administrative cost of processing small claims) and can also help keep your premium costs lower.

Choosing the Right Deductible Amount:

Generally, the correlation between deductible levels and insurance premiums is simple: The higher the deductible, the lower the cost of insurance. Conversely, the lower the deductible, the higher the cost of insurance. Deciding how to make that trade-off is a function of math and your own comfort level with higher out-of-pocket costs if you choose a higher deductible.

If you’re unsure how changing your deductible might affect your insurance premium, just ask! We’re happy to run the numbers for you to illustrate how changing the deductible affects your premium. Sometimes, increasing or decreasing the deductibles doesn’t generate a significant premium difference but it may be worth a look.

At Compass Insurance Services, we’re always willing to review your policy at any time and answer questions you may have. We want you to be comfortable with the out of pocket expense you incur in the event of a loss. Call us today at (715) 693-0100 to speak to one of our licensed agents about your policy.

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