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Deductibles and what's best for you.

Updated: Jun 10, 2021

For those that are unsure what exactly a deductible is, the actual insurance definition is: the amount paid out of pocket by the policy holder before an insurance provider will pay any expenses. In layman terms? Your deductible is what you will have to come up with in the event of a covered loss.

What's the best deductible? That is going to depend on you and the type of policy. Most auto policies are written with a $500 deductible. But you can increase or decrease this, which could have an impact on your premium rates.. This might be because you are older (not a youthful driver), have a clean record, etc. Then changing from a $500 deductible to a $250 deductible or even a $0 deductible might not save you much on your premiums at all. However, say you are a 22 year old driver (still considered a youthful driver), and maybe you have 2 speeding tickets or a violation on your record. Increasing your deductible will possibly have a larger impact on your premium. But remember - it's what you will have to come up with in the event of a loss. So if you increase it to a $1000 deductible, you want to make sure that you would be able to come up with a $1000 in the event of a loss.

So, for parents like myself out there that have to put your youthful driver (by youthful driver I mean the know-it-all 16 year old boy that of course drives better than every experienced driver on the road) on your policy - it might be worth checking out the differences in premium if you increase your deductible. Then of course, make your teenager work it off, right? Or, don't get it fixed and have them duct tape their headlight on. Not really for safety purposes. But it is tempting! Then again, if you carry liability only on the teenager's car... I'd make him buy the duct tape himself. Or get the bright pink stuff his sister likes and basically just wrap his entire truck with it for fun.

On your homeowners - you also have a deductible. Most homeowners policy have a $1000 deductible. Again, if you increase this it might make a larger impact on your premium by bringing it down. If you lower it, your premium will go up. Remember, make sure it is a amount that you can come up with in the event of a loss. Say you increase it to a $2500 deductible, a wind/hail storm comes through and damages your roof. That $2500 is going to be deducted from any payout amount you may receive and it will be the amount that you will have to pay to the contractor.

There is usually some confusion as to when your deductibles will apply. Let's discuss auto insurance. If you hit my parked car and do the right thing and leave your insurance information (We love honest people!) The damage to fix my car will come off your liability, so your deductible would not apply. However, if you also damaged your car when you hit mine, your deductible is going to apply to fix yours.

I've used many times the example of running off the road and hitting a telephone pole or a guard rail. That's property damage - that would come off your liability. Again, your deductible will not apply. To fix the damage to your car, your deductible is going to apply. Say you are injured when you ran off the road. That will come off your Personal Injury Protection (aka PIP - I've discussed this in prior posts). This may or may not carry a deductible.

On your homeowners you might ask when does my deductible apply? Storm damage, fire, personal property loss, etc. your deductible will apply. But there are some coverages such as refrigerated product, fire department service charge, etc. that may not have a deductible. Also, kind of like the auto policy, there isn't normally a deductible on your liability. So when your teenager sneaks the friends over to ride your wheeler and they start playing some weird game of chicken and the friend steps in a hole and breaks his leg - yep, that'll come off your liability but there probably won't be a deductible involved. (I think I've played out every possible bad teenager thing to prepare myself for my son's 16 - 18 year old age span.)

It's important to understand your policies and what you might be or might not be responsible for. This goes from your personal policies such as home and auto to any commercial policies you carry. Be prepared so when the son hits your car with his four wheeler - you already know you're paying that deductible and then making him rake leaves for 2 weeks straight while you drive around the house on his four wheeler he can no longer drive. (Trust me - it's worth it!)

Usually my blogs end with call your agent. This one is no different. I always encourage you to call your agent. But this time I'm also going to highly recommend you read your policy as well. Because trust me, when you do, you are going to have questions. Come in and see us. Sit down with your agent and let's walk through that thing. We'll answer any questions you might have.

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