What Is a Deductible and What Do You Do with It?

We jump right into things with this one. What is a deductible? A deductible is the amount of money you have to pay out of pocket before your insurance policy starts paying for a claim. Choosing a higher deductible can lower your insurance premiums because the insurance company knows they won’t have to pay out smaller claims. This is particularly relevant for commercial insurance. Deductibles also discourage people from filing claims for minor issues or normal wear and tear, preventing insurance from being treated like a warranty or a lottery system. Insurance is meant for sudden and accidental damage, not maintenance.

How to Think About Setting Your Deductible:

• Keep your deductible a bit lower than the money you typically have readily available. You need to be able to pay it before the insurance company pays your claim.
• Aim for a deductible that is high enough to get some discounts on your premium.

The primary goal is to avoid needing to file a claim. Insurance is a secondary plan for when unexpected events occur.