Deductibles

Deductibles are the amount of money that you have to pay out-of-pocket before you begin receiving insurance benefits. Usually, the amount of money is a flat dollar amount that applies whenever you need to activate your insurance for certain situations.

If you have a very high deductible, your premiums won't be quite as much money. However, if you have a low deductible, your premiums will be higher. The amount of the deductible varies, depending on the type of insurance and the insurance policy you have.

Deductibles are found in all different types of insurance, including medical insurance and car insurance.

Medical Insurance
When you pay your medical insurance deductible, your insurance company will pay for any bills after that amount. For example, if you become severely ill and end up in the hospital for a couple of days, it may cost a few thousand dollars. In order to activate your insurance, you will need to pay your deductible first. An average deductible for medical insurance is $500, but it may be higher or lower depending on your policy.

Once you have paid the deductible, your insurance company will pay the rest of the hospital bills (depending on your policy and what hospital procedures are covered) usually up to a maximum amount of money that your policy covers.

Care Insurance
If you are in a car accident and your insurance company is going to pay for the damage to your car, your deductible will need to be paid first. Your car insurance company will cover the rest of the dollar amount, usually up to a maximum amount. An average deductible for car insurance is $500 dollars. If you prefer a lower deductible, you will have to pay for it, usually in higher premiums.

For example, if you are driving your car and you run into a pole, there may be $2,000 worth of damage to your car. You will pay for the first $500 dollars and your insurance company will pay for the rest: $1,500.

If you are in a car accident involving another car and it's your fault, your insurance company will usually have to pay the damage done to both cars. Again, once you pay the deductible, the insurance company will cover the rest, or up to the maximum amount.

However, in some cases, the damage done your car may be minimal. If you accidentally dent or scratch your car or something else minor happens, chances are that it will cost less than $500, or whatever your deductible is. In this case, you are better off just paying for the damage yourself because it doesn't make sense to pay your insurance company $500 when you would pay less to fix your car.

If the damage to your car ends up being over the deductible by a small amount, maybe only $100 or $200 over, you would have to decide if it still would be worth paying the deductible and then having insurance cover the final bit of money. This is because when you activate your care insurance policy, often your rates after that go up. This can happen each time you are in a car accident, so your rates slowly keep going up.

So if you pay $500 dollars and your insurance company pays $200, you would save yourself $200 at first. But if your monthly rate was $100 and the insurance company raises your rates to $125 per month after your accident, you are now paying an extra $300 per year. That $200 will start to sound pretty cheap after a couple of years.

Be sure to check with your insurance company about questions concerning the deductible amount if you are unsure.