Why Do Deductibles Matter?

What is a deductible and why is it important?


A deductible is the amount of money deducted from an insured loss. This amount represents the risk between the policyholder and the insurance company. It is typically a percentage of the total amount on a policy, or a specified amount. Overall, the higher the deductible, the less the consumer’s policy premium will be.

If you have a $500 dollar deductible, $500 will be deducted in the event that you need to file a claim. For example, if your insurance company determines that you have a loss that is worth $8,000, you will receive a claims check that is $7,500. If an accident occurs, your insurance company will pay for damages up to the limit on your policy.

It is important to choose a deductible that you can afford. If an accident occurs, you will need to have enough money to cover the deductible.


A higher deductible will save you money. While having a higher deductible gives you a lower premium, it is important to remember that your deductible is the amount of money that you’ll be responsible for in the event that you have a claim.

Liability claims do not require a deductible. On an auto insurance policy, deductibles apply to comprehensive and collision coverage. For a homeowners policy, the deductible applies to structure damage of the house or any personal items; however, it does not cover if the homeowner is sued or if a medical claim is made because someone is injured while in their your home.


Where is my deductible located on my policy? Deductible amounts can be found on the front page of both auto and homeowners insurance policies.

Do you need to pay your deductible even if you’re not at fault? It depends how quickly and easily fault is determined after the accident occurs. If you decide you would like to have your car fixed while investigation continues, there is a possibility that you’ll need to pay the deductible out of pocket. However, through subrogation, the policyholder is reimbursed from one insurer to another insurer.

What am I responsible for paying if my car repairs cost less than my $500 deductible? If your car repairs are less than your deductible, you will receive no money from your insurance company. Because these are considered “small repairs”, you are expected to cover them yourself.

Who is in a good position to raise their deducible? Someone who has a perfect driving record and never been in a car accident may be a good candidate to raise their deductible.

As you can see, choosing the right deductible is important for several reasons. You want to ensure that if the time comes that you need to file a claim, you are in a comfortable position; one that will not a burden financially.