What Texans Need to Know About Deductibles
Deductibles are one of the most important parts of your insurance coverage. They have the power to impact everything from your budget to your coverage amount. Knowing how deductibles work can help you avoid financial surprises when you file a claim — and make smarter decisions about your premiums.
There are no silly questions when it comes to insurance. In fact, when it comes to deductibles, it’s a question Agents wish policyholders would ask about more!
Let’s take a closer look at deductibles — what they are, how they impact premiums, and how to select the right one for your needs.
What Is a Deductible?
A deductible is the amount of money you have to pay before your insurance company kicks in on a covered loss. Deductibles are key, common features of auto, property, and health insurance coverage. Typically, the higher your deductible, the lower your premium. Premiums are the monthly amount you pay to keep a policy active; a deductible is what you pay when you file an insurance claim.
There are two main types of deductibles:
- Fixed dollar amount deductibles have set amounts that are decided when you purchase or renew your policy.
- Percentage-based deductibles, primarily seen in property insurance, are based on the value of the total insurance amount and typically range from 1% to 10%.
How Do Deductibles Work?
For auto and property insurance policies, you usually pay a deductible each time you file a claim. For health plans, your plan starts covering the costs once you reach your deductible.
Let’s say you’ve got a $500 deductible on your comprehensive auto insurance policy. A spring thunderstorm spins out a hailstorm, and your truck is caught out in it. You end up with a smashed windshield and dented hood, totaling in damages. After you pay that $500 deductible, your insurance company will pick up the remaining $1,500 on that repair bill.
How to Choose the Right Deductible for You
With deductibles, a higher premium generates a lower deductible, while a lower premium prompts a higher deductible. It may be tempting to take the lower premium/higher deductible option, but it’s important to weigh all your options before making a decision.
When figuring out how to determine your insurance deductible, it’s important to know that every person — every family’s — needs are different. It’s a personal decision that should be tailored to individual needs and lifestyle.
First and foremost, think about what you can comfortably afford out of pocket when something happens to your vehicle or property. If you opt for the $1,000 deductible, make sure you can get your hands on that amount of cash when you need it most.
But, if you’re in a strong financial position where you can comfortably pay more out of pocket, a high deductible could save you money over time.
How Deductibles Impact Claims
Deductibles apply to every claim you file for property and auto policies, so you often have to weigh whether or not to file one — especially when it comes to smaller losses. For example, if your deductible is $500 and repairs cost $650, the $150 payout may not justify a potential increase in future premiums.
Need help determining the best deductible for your needs and budget? Give your Agent a call. They can walk you through your policy options — and the deductible amount.
What Is My Deductible?
If you’re not sure how much your deductible is, there are three common ways to find out:
- Log into your Texas Farm Bureau Insurance account.
- Reach out to your Agent.
- Review your policy declarations page. (Usually, this document is mailed to you after purchasing or renewing a policy.)
Now that you’ve got deductibles down pat, brush up on health insurance terminology.
