The deductible is the amount the insured pays out-of-pocket for towards any damages or loss before their insurance company starts to pay for the claim. This can be either a percentage of the total amount of insurance or a specific dollar amount.
For example, if you have a $1000 deductible on your auto insurance and you get into a car accident with $3000 worth of damage to your vehicle, you will pay that $1000 and your insurance will cover the rest. The process is the same for homeowners’ insurance claims.
With that being said, it may seem that choosing a lower deductible is the optimal decision as you will be paying less out-of-pocket if you file claim. However, a lower deductible general means you’ll be paying more on your monthly insurance payments. So if you’re a safe driver who almost never gets into accidents, a higher deductible could be the better option. It’s estimated that raising your deductible from $500 to $1000 can save up to 30% on your yearly insurance expense.Of course, the most important thing to consider is that you can afford to pay the deductible you decide on.