As long as there have been insurance policies there have been insurance deductibles. The general idea of a deductible is that if you have a loss the deductible is your “share” of the loss. So, lets say you have an auto colission loss and your deductible is $1,000. The total amount of damage or “cost to repair” is $12,000. The insurance company will pay you $11,000 to repair your covered vehicle.
A deductible is the amount you pay out of pocket when you make an insurance claim. Deductibles are usually a specific dollar amount, but they can also be a percentage of the total amount of coverage on the policy. Some deductibles are the same across all your policy perils, some have separate deductibles. Some homeowners insurance companies, for instance, have seen alot of wind claims in certain areas over the course of many years. You may see a wind deductible that is separate from say a fire loss. Many companies will have a 1% deductible. This doesn’t mean you pay 1% of the loss, it means you pay 1% of your total coverage. If you have a $500,000 home limit your deductible is $5,000 on a loss.
As you can see the insurance companies will use the deductible as a tool to offset claims and thus keep premium amounts reasonable. Some insurance companies have come up with tools to help you save money on your deductible while rewarding customer loyalty.
Some companies will offer you a combined deductible, so if you have multiple covered cars involved in a single accident or maybe a scenario where your vehicle and home are both damaged in a single event, like a hale storm or backing into a garage door, you will only pay one deductible.
Some companies have a “deductible bank” or “deductible savings bank”. Its a bit misleading. In most cases its like a loyalty system where every year you keep a policy active you gain $100 in your deductible bank. So after a year your deductible would still be $1000 but at the time of loss they would reduce it by the $100. Once you use it the total resets in your bank. Every company has different rules but be aware that in some cases this is an option you actually pay more for.
If you are savvy or have a great insurance agent you can use these tools to your advantage. Ask about these options today in so you can start saving money.