A Deductible and How it Affects YouInsurance, of all types, is there for your protection, but there are some aspects of insurance that many people don’t understand or grasp completely.  If you have ever experienced an automobile accident, for example, you may be surprised to hear from the insurance company that you are responsible for a portion, before any payments are made.  This portion, of which you are responsible, is referred to as a “deductible” and that’s where some confusion sets in.

Definition of a Deductible

For example, let’s assume you are travelling down the road when suddenly you swerve to avoid an animal and end up striking a tree, causing front end damages to your car.  You get the repair estimate for $2000, but the claim payment is only for $1500. “Deductible” is defined as the amount of money you are responsible for out of pocket for a loss before the insurer pays its portion.  In this particular situation, you have a $500 deductible for collision coverage under your N.C. auto insurance policy so this is the amount you must absorb financially before your insurer pays the remaining portion.

What is bothersome to some people is having to absorb some of the cost of an accident that isn’t their fault.  For example, let’s assume your car gets vandalized one night and the next morning you come out to all four tires slashed, and the side of the car keyed.  This certainly is not your fault; however, when you submit the comprehensive claim, you are told you owe $250 towards the cost of repairs. This is where some people get frustrated because they don’t fully understand the deductible. *Most N.C. homeowners and auto insurance deductibles are applied per instance versus annually, like a health insurance policy.      

Benefits of a Deductible

Deductibles are used as a motivation tool to protect your property (home and auto) and lessen the likelihood of damages.  When you agree to absorb an amount of cost (out of pocket) when a loss happens, it encourages you to be more mindful and careful.  Typically, the higher your deductible the lower your insurance premium.  If you have any questions or concerns about your deductible under your N.C. homeowners or auto insurance policy, feel free to contact us at Twin City Insurance at 828-464-2643.