Deductibles 101: Pay Less Now or Pay Less Later?

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.

• You pay the deductible first.

• 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

• The deductible applies per claim.

• Example: You have a $500 deductible and $3,000 in repairs. You pay $500, and the insurer pays $2,500.

⚕️ Health Insurance

• You pay one annual deductible before your insurance begins to cover costs.

• 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:

1. Do I have the cash? Can you comfortably pay your deductible amount right now if an emergency hits?

2. 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