Hi. For many young people who are just getting out from under their parent's insurance cover, there are many such questions that people like to pose. Just what the heck is an insurance deductible anyway? Well, this article will aim to explain the intricacies of Insurance.
Insurance, is essentially exactly like betting against yourself or your property. Insurance takes care of the "if" question. If something happens, then what? Well, then if you have insured yourself correctly, then you will be covered. That is how Insurance is supposed to work.
Now, Insurance does not always work that way. You see, the main motive of Insurance companies is to protect themselves from heavy losses. So they are trying to take in the most cash in the form of premiums and give out as little as possible in the form of claims. Your only insurance against insurance companies is that you read the fine print on your contract so you know exactly what is covered and what is not.
No matter what type of insurance you end up getting (you may even buy more than one kind), you will have to deal with a deductible in most cases. A deductible is what you would pay out of your own pocket should the trigger event occur.
So, for example - If you buy health insurance and set your deductible to be $100, then you get sick and have to go to the hospital; if your bill is for $1000, then your insurance will pay for $900 and you will have to pay $100 out of your own pocket.
Of course, deductibles affect premiums. A premium is what you pay every month for your insurance. Say you are covered for $100,000 in damages. Your premium is the amount you would pay every month to remain covered. The higher your deductible is the lower your premium should be. If you are willing to pay more out of your pocket, then you are effectively buying less insurance therefore you should pay less premium.
It is important to select your deductibles based on how likely you are going to file a claim and how much premium you can afford. Say you are a young athlete. You are less likely to have lifestyle diseases such as heart disease and more likely to break your leg skiing, which would cost a lot of money to fix up in the Emergency Room. So you should probably think of having a higher deductible and lower premium.
This is just an example; please do as much research as possible into the type of insurance you want to buy. Happy shopping and be safe!
Insurance, is essentially exactly like betting against yourself or your property. Insurance takes care of the "if" question. If something happens, then what? Well, then if you have insured yourself correctly, then you will be covered. That is how Insurance is supposed to work.
Now, Insurance does not always work that way. You see, the main motive of Insurance companies is to protect themselves from heavy losses. So they are trying to take in the most cash in the form of premiums and give out as little as possible in the form of claims. Your only insurance against insurance companies is that you read the fine print on your contract so you know exactly what is covered and what is not.
No matter what type of insurance you end up getting (you may even buy more than one kind), you will have to deal with a deductible in most cases. A deductible is what you would pay out of your own pocket should the trigger event occur.
So, for example - If you buy health insurance and set your deductible to be $100, then you get sick and have to go to the hospital; if your bill is for $1000, then your insurance will pay for $900 and you will have to pay $100 out of your own pocket.
Of course, deductibles affect premiums. A premium is what you pay every month for your insurance. Say you are covered for $100,000 in damages. Your premium is the amount you would pay every month to remain covered. The higher your deductible is the lower your premium should be. If you are willing to pay more out of your pocket, then you are effectively buying less insurance therefore you should pay less premium.
It is important to select your deductibles based on how likely you are going to file a claim and how much premium you can afford. Say you are a young athlete. You are less likely to have lifestyle diseases such as heart disease and more likely to break your leg skiing, which would cost a lot of money to fix up in the Emergency Room. So you should probably think of having a higher deductible and lower premium.
This is just an example; please do as much research as possible into the type of insurance you want to buy. Happy shopping and be safe!
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