Friday, March 11, 2011

What's a Deductible?

When you look at your policy, you’ll notice that next to the coverage limit, there is a “deductible”. You may be unaware of what a deductible is, so Winnie and Phinn are here to explain what exactly this word means, and how it works with your policy!

In addition to your monthly premium, which pays for the insurance contract between the insurance carrier and you, you also have a “deductible” that you pay when you have a loss. When a claim is placed, the insurance company will pay to repair or replace the damaged property, but they’re not going to pay the full amount. The deductible is the amount that you pay out of pocket to eat some of the cost of the claim. For example, if you a fire that causes $100,000 worth of damage in your home, and your policy deductible is $500, the company would pay for $99,500 to repair your home. ($100,000 - $500 deductible).

Deductibles are also found in your auto policy as well for the comprehensive and collision sections. Typically the comprehensive deductible is slightly lower than the collision deductible. The higher you make your deductible, the lower your annual premium payment will be, since you are essentially paying for more of the claim.

Deductibles can also be found in business and liability policies. These can be a little more difficult to explain, but hopefully Winnie and Phinn have given you an idea of what this term means, and what it does for your policy. As always, you should call your agent at The Coffey Insurance Agency to discuss your deductible, and if you have any more questions regarding it. Until next time…

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