Dealing With Your Insurance Deductible

An insurance deductible acts as a sort of "gatekeeper" on your insurance policy. Deductibles apply for many types of insurance, including health, automobile and other personal liability insurance policies. A deductible is the amount of money you must pay before the insurer will pay for any of the claims you make for the risks insured under your policy. Dealing with deductibles means knowing how to determine what deductible is appropriate for you as well as understanding what to do with the deductible amount once you file a claim.

Things You'll Need

• Claims record
• Calculator
• Budget

Instructions

1. Get a copy of your claims record from your insurance company. This will tell you how many claims you've made on your policy since you've had it in force. If you haven't been with your current insurance carrier for very long, it may be wise to get your claims record from a previous insurer as well.

2. Contact your insurance company and ask about the difference in your premium when you raise or lower your deductible. Increasing your deductible usually results in a lower premium amount since you agree to pay more for claims out of your own pocket.

3. Raise or lower your deductible accordingly. If your claims history indicates that you rarely or never file claims on your insurance, and you feel comfortable paying this money out of your own pocket, raise your deductible amount to the highest dollar amount you're capable of paying out of pocket should you have to file a claim. Lower your deductible if you find you can't afford your current deductible or you make many claims on your policy. This will increase your premium, but it may be worth the additional cost if you use your insurance frequently. Repeat this process for each insurance policy you have.

4. Pay your deductible. When you file a claim, pay your deductible amount directly to your service provider. For example, pay your co-pay or deductible amount directly to a health care provider. The insurance company will cover the remainder according to the terms of the policy you have.

Tips & Warnings

• Even if you have not made many claims on your insurance policy, this doesn't necessarily mean you should increase your deductible. You must have enough money to cover your deductible to the amount you set it to. So, if the maximum deductible on your policy is $1,000, but you can only afford a $500 deductible, it's probably not a good idea to increase your deductible, even if it means you save more money on your premium with the higher deductible. The savings must offset your higher deductible or you'll place additional financial risk on yourself and defeat the purpose of having insurance.

References

• "Practicing Financial Planning for Professionals (Practitioners' Edition), 10th Edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007
• "Life & Health Insurance, License Exam Manual, 6th Edition"; Dearborn Financial; 2004