Insuring your car and home is essential. But knowing the amount of the deductibles to set can be tricky. Deductibles essentially allow you to share the financial risk of loss with your insurance provider. Your premium will be lower with a higher amount of risk you are willing to take on with a higher deductible.

Basically, the deductible is how much you are responsible for before the insurance company will pay on a claim. For instance, if you’re in a car accident and the cost to repair the car is $1,200 and you have a $500 deductible, you only have to pay for the first $500, while your insurance company covers the other $700.

Deductibles generally only apply to property damage and not liability if you are found responsible for injuries to others or damage to their property. Deductibles vary widely by state or company, with some as high as $1,000. The norm, though, is between $250 and $500.

You usually have to carry separate deductibles for comprehensive and collision coverage as part of your auto insurance policy. Comprehensive will cover you in the event of fire, vandalism, glass damage and theft. Collision will cover any vehicle damage that results from an accident, regardless of who is at fault. You will pay the deductible that relates to the claim type you have.

In Massachusetts, if you are in a car accident that wasn't your fault and the other party does have insurance, the damages to your car will be covered under their property-damage liability.

Suggestions on Setting Your Deductible

  • Choose a deductible you can afford. And always have that amount in an emergency fund just in case. If your deductible is $500, for example, make sure you have that amount available in case of loss.
  • Consider your car’s value. Determine your car’s monetary value so you know what will make sense to pay for both collision and comprehensive coverage. This will also assist you in deciding how high to set all your accompanying deductibles.
  • Know your coverage. Keep in mind that insurance is designed to safeguard you in the event of a financial setback, but it’s not designed to cover small losses you are able to pay out of pocket.
  • Avoid extremes. Remember, the lower your deductible, the higher your premiums will be. It’s good to strike an even balance, without straying too far at either extreme. If your deductible is set as low as it possibly can, you will pay a much higher premium. If it’s too high, you may find yourself struggling to cover your share of the cost in the event of a problem.

Home Insurance

Deductibles for home insurance work in much the same way. There are three kinds of home insurance deductibles:

  • Dollar amount: This is the most common, just like auto insurance deductibles. Let’s say you have a small kitchen fire and the damage comes to $3,000. If you have a deductible that is $1,000, you will have to pay that before your homeowners insurance company pays the remaining $2000.

  • Percentage: Your deductible is a percentage of the total coverage amount outlined in your policy. If your home is insured for $200,000 and your deductible is two percent, you will have to pay the first $4,000 of the claim before coverage kicks in. 

  • Split: This is a combination of the first two. A dollar amount usually applies to most claims, but you may have to pay a percentage with certain events, such as earthquakes or hurricanes. 

Contact Bearce Insurance for Home & Auto Insurance

We can help you determine the right deductible for your car and home insurance. You can contact us locally at 508-586-3400 or toll-free at 800-498-9900, or get an online quote today.