Understanding Deductibles in Personal Lines Insurance

A deductible is an important part of personal lines insurance. Knowing how deductibles work can help you make informed insurance choices and manage your finances more effectively.

What is a Deductible?

A deductible is the amount you must pay out-of-pocket for covered expenses before your insurance kicks in. For example, if your auto insurance policy has a $500 deductible and you file a $2,000 claim, you would pay the first $500 while your insurer covers the remaining $1,500.

There are two main types of deductibles:

• Fixed deductibles—These are set amounts that remain the same, commonly used in auto and home insurance.

• Percentage deductibles—Common in homeowners insurance, these deductibles are based on a percentage of the insured value. For example, with a 2% deductible on a $200,000 home, you would pay $4,000 out-of-pocket.

Impact on Premiums

Opting for a higher deductible usually reduces your insurance premiums, making it a good choice if you prefer lower monthly payments and can handle higher out-of-pocket costs when filing a claim. On the other hand, a lower deductible results in higher premiums but reduces your financial burden in the event of a claim.

Choosing the Right Deductible

Choosing the right deductible requires balancing your finances and risk tolerance. Consider your savings, income stability and the likelihood of filing a claim. A higher deductible may be a good choice if you have substantial savings and rarely file claims. However, a lower deductible might be the better option if you prefer more predictable expenses.

Trusted Insurance Provider Near You

A.M.G.A. Brokerage Commercial Underwriters of America in EFFORT , Pennsylvania, can help you choose the right insurance policy. Our team helps clients understand deductibles and other key insurance terms. Contact us today to learn more.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.