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What Is A Deductible In Insurance?

If you have ever purchased an insurance policy, you may have come across the term "deductible." A deductible is one of the most critical components of an insurance policy. It is the amount you pay out of pocket before your insurance coverage kicks in.

What Is A Deductible In Insurance?

In this blog, we will take an in-depth look at what a deductible is and how it works.

What Is A Deductible?

A deductible is an amount of money that you agree to pay towards a claim before your insurance provider begins to pay out. This amount can vary depending on the type of insurance policy you have purchased. For instance, in an automobile insurance policy, the deductible might be $500 or $1,000. Once you have paid the deductible amount, the insurance company will start paying towards your claim.

How Does A Deductible Work?

Let's assume your car has been in an accident, and it will cost $2,000 to fix it. If you have an insurance policy with a $500 deductible, you must pay for the first $500 of the repair work out of pocket, and the remaining $1,500 will be paid by your insurance provider. However, if the damage only costs $300 to fix, you will pay the entire amount, and your insurance provider will not pay anything. A deductible is a way of sharing the cost of your insurance policy with your insurance provider.

Why Do Insurance Companies Require Deductibles?

Insurance providers require deductibles for several reasons. Firstly, it is a way to ensure that customers only make claims for significant losses. If you had to claim every time your car got a small scratch, the insurance company would spend a lot of time and money processing small claims, which could lead to higher premiums for everyone. Additionally, it is a way of sharing the cost of the policy between the customer and the insurance provider.

Types Of Deductibles

There are several types of deductibles available in different types of insurance policies. These include:

  • Fixed deductibles: This is a fixed amount that you pay for each claim that you make.

  • Percentage deductibles: This is calculated as a percentage of the total amount of the claim.

  • Split deductibles: This is when there are different deductible amounts for different types of claims.

  • Zero deductible: This is when you do not have to pay anything out of pocket. However, this type of policy may have higher premiums.

Benefits Of Having A Deductible

One of the essential benefits of having a deductible is that it can help to lower your insurance premiums. A higher deductible means that you are taking on more risk in the event of a claim, which can result in lower premiums. Additionally, a deductible can help you to avoid making small claims that can harm your insurance record and result in higher premiums.


A deductible is an essential component of any insurance policy. It is a way of sharing the cost of the policy between you and your insurance provider, and it can help to lower your premiums in the long run. Understanding how deductibles work can help you to choose the right policy for your needs and budget. At Baker & Carey Insurance, we offer a wide range of insurance policies, and our team of experts can help you choose the right policy for your needs. Contact us today to learn more about our products and services.

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