Insurance and Finance

Back to Basics: Understanding deductibles

By Paula Felps 4.6.15

Shelby County Texas Farm Bureau Insurance agency manager Paul Pustka frequently addresses the following scenario from members: “People want to save money, so they ask for a higher deductible on their insurance policy. But people really need to understand what deductibles are about before they make that change,” he says.

Higher deductibles allow you to pay a lower insurance premium, but they also require you to pay more out of pocket if you need to file a claim on your homeowners or auto insurance.

“When you set a deductible, you basically determine how much you can afford to pay if something happens to your car or home,” Pustka says. “What I always ask people is, ‘How much can you afford out of pocket?’ If you want a $500 deductible on your automotive policy, but you can’t get your hands on the $500 to get your car fixed if a bird flies into your windshield, then you need to lower the deductible.”

However, for those who are in a position to be able to pay out of pocket, a higher deductible allows for good cost savings that can add up over time. It’s a savings that is well worth it — but only for those who are in a position to afford it.

“The bottom line is, you need to sit down with your agent and determine what you can afford to pay,” Pustka says. “It’s not just a matter of saving money, it’s a matter of being able to pay for any damage if it occurs.”

Coverage and discounts are subject to qualifications and policy terms and may vary by situation.  © 2015 Texas Farm Bureau Insurance