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Premium Insurance 101
Deductibles 101: Pay Less Now or Pay Less Later?
Tan Menon
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What is a Deductible?
It’s your upfront payment toward a covered claim.
Think of it as your share of the repair bill before your insurance company pays the rest.
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You pay the deductible first.
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The insurer covers the rest (up to your policy limit).
The Big Trade-Off: Deductible vs. Premium
This is the most crucial takeaway: Your deductible choice directly affects your premium, which is the regular cost you pay for your insurance policy.
Choosing a higher deductible usually means you’ll pay a lower premium each month. On the other hand, selecting a lower deductible generally results in a higher premium.Why does this relationship exist?
When you choose a higher deductible, you are telling the insurance company you are willing to take on more financial risk (the bigger upfront cost). Because they take on less risk, they charge you a lower monthly or annual premium.
High vs. Low Deductible: Which Should You Choose?
When purchasing a policy, you usually get to choose your deductible amount (common amounts are $500 and $1,000 for home and auto). Your choice should align with your personal financial situation and risk tolerance.
The Key Trade-Off
You have a choice:
High Deductible:
Lower monthly premium, but you’ll pay more if you file a claim.
Low Deductible
Higher monthly premium, but you’ll pay less during a claim.
The Bottom Line: Choosing a higher deductible means lower monthly costs but more risk at claim time—and vice versa.
How It Works in Action
🚗 Auto & 🏠 Home Insurance
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The deductible applies per claim.
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Example: You have a $500 deductible and $3,000 in repairs. You pay $500, and the insurer pays $2,500.
⚕️ Health Insurance
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You pay one annual deductible before your insurance begins to cover costs.
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Next Steps: Once met, you may still pay coinsurance (a percentage of the bill) or a copay (a flat fee) for services.
The Smart Decision
When choosing your deductible, ask yourself:
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Do I have the cash? Can you comfortably pay your deductible amount right now if an emergency hits?
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How often do I file a claim? If you rarely use your insurance, a higher deductible and lower premium might save you money over time.
Pro-Tip: Pick a deductible you can pay without stress. Always get quotes to see how different amounts impact your premium. Call us we are right here for all you Insurance questions . Tansagency.com.
Phone: 469.269.6539
Email: sales@tansagency.com
