What is a deductible and what to do with it

We explain what an insurance deductible is and how to set it up. Regardless if it’s an auto insurance deductible, a homeowner insurance deductible, or a commercial deductible the principles apply.

A deductible is the amount of money you pay out-of-pocket before your insurance policy starts paying. Deductibles act as a method to adjust your insurance costs; choosing a higher deductible can lower your insurance price but that means you pay more out of pocket before your insurance takes over. This is more common in commercial insurance.

Deductibles have another function, they help prevent fraudulent claims. Without them, people might try to use insurance for regular maintenance or minor issues. Insurance is for sudden and accidental damage, not for things like lack of car maintenance. Set your deductible at an amount you can afford to pay at any time . Balance having a deductible low enough to pay, but high enough to get discounts. Insurance is a backup plan, not the first plan, so higher deductibles often make sense but don’t go to high.