Original Article Date: 02/06/2023 Staff Writer • Buffalo, NY
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What is a deductible?
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A deductible in property & casualty insurance refers to the amount of money a policyholder agrees to pay out of pocket before the insurance coverage kicks in. This concept is often referred to as a “self-insured retention” and is an important factor to consider when purchasing insurance. In simple terms, the deductible is the amount you pay before the insurance company will pay out on a covered claim.
When purchasing insurance, policyholders must consider the trade-off between the premium and the deductible. A higher deductible will generally lead to lower premiums, and vice versa. It's important to find the right balance between the two, to make sure you are in a comfortable position if it ever becomes time to use it.
What options are available?
The amount of the deductible will vary depending on the type of insurance coverage you have. For example, your homeowner's insurance policy may have a deductible of $500 each loss, while your car insurance policy may have a deductible of $1,000 for collision damage.
Most insurance policies have deductibles available at $100, $250, $500, or $1,000.
Liability claims (home and auto) typically do not have a deductible, whereas business insurance lines may or may not have a deductible. It's important to consult your insurance policy before moving forward with a claim.
Can I get my deductible back?
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In most circumstances, no. Your deductible is your pre-agreed upon share of the loss. The exception to this rule is known as a process called Subrogation, where you as the policyholder request your insurance company fix your damages and pursue the other insurance company directly.
In subrogation, you are required to pay your deductible up front to your insurance company, and as long as you are found not to be at-fault, you will receive your deductible back. This usually happens after a few weeks/months, because your insurance company is attempting to recover the money from the other driver's insurance.
It's important to remember that deductibles are only applied when there is a covered loss. If there is no claim, there is no deductible. You can usually choose the amount of your deductible, and changing your deductible usually has an impact on your premiums. Understanding how deductibles work in property & casualty insurance is crucial for making informed decisions when purchasing insurance.
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