What Is A Deductible?
The deductible is the amount of risk that you retain when you transfer risk to the insurance company.
OK, so that’s the definition, but what does it really mean?
You pay the insurance company to take on risk on your behalf. That means that if there’s a loss that’s covered by the policy, they’ll pay for it so that you don’t have to. That’s the whole idea of insurance. But insurance is designed to handle unexpected, sudden events that cause a loss that you couldn’t reasonably recover from. Insurance is not designed to handle small losses that aren’t catastrophic. Because of that, you retain a certain amount of risk, and that’s called a deductible.
If there’s a claim, the deductible is the amount you chip in to the total of the claim. If you have a $5,000 loss and a $500 deductible, you’d get a check for $4,500.
But I Already Paid My Premiums, Why Do I Have To Pay A Deductible To The Insurance Company?
You don’t. The deductible is not money paid to the insurance company, the deductible is money that you add and use along with the proceeds of the claim to replace the property that suffered a loss. If your TV is stolen, and replacement cost is $1,000, you’d get a check for $500 from the insurance company and you’d pay the other $500 (your deductible) to whoever you buy the replacement property from, generally a retail store.
Should I Increase My Renters Insurance Deductible To Save Money?
Generally, no, you should not increase your renters insurance deductible to save money, because it’s a false economy. Let’s assume your policy costs $150.00 a year at a $500 deductible. If you raise that to a deductible of $1,000, you might save ten dollars a year. If there’s a loss in the next fifty years in that example, you’ve actually lost money. You’ll have to pay out $500 more than you would with a $500 deductible, but you haven’t saved $500 on the premiums – probably far from it!
If you’d like to learn more about deductibles or coverage in general, just call (800)892-4308 or click to get covered - whether you need College Park renters insurance quotes online or coverage anywhere else!
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