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Understanding Insurance Deductibles, Premiums and Limits

Insurance can sometimes be confusing especially if it is your first time buying a home or car, getting married, having a new driver added to your household, and going through different seasons in life. We have highlighted helpful information below to guide you to understanding how insurance works with deductibles, premiums, and coverage limits.

What is an insurance premium? Your insurance premium is what you pay depending on the billing option you select (Annual Paid in Full, Quarterly, Monthly, etc.) for your insurance policy. Insurance premiums are sometimes referred to as your “insurance rate.”

Your insurance premium depends on several factors such as, your policy’s limit, policy deductible, and insurance claim history. There may be other factors that go into your insurance premium depending on the type of policy and sometimes even the state you live in.

Why did my insurance premium change? Many things can impact your premium and cause it to change. For example, inflation can impact how much it costs to repair or replace your house or car. Here are other reasons your premium may change:

· Inflation

· Your insurance claim history

· Adding coverages

· Increasing your policy’s limits

· Adding family members to your policy (like a new driver)

· Changes to your house or vehicle

· Changing what you use your house or vehicle for, like renting out a room in your home

· Your driving record- Motor Vehicle Record

It is important to always review your insurance premium especially when you make a policy change and most importantly when your policy comes up for renewal.

What is an insurance deductible? Insurance deductible is a fixed amount that you select when you buy your policy. In an insurance claim that same insurance deductible is the portion you will have to pay first before your insurance will kick in.

For example: Your car gets damaged in an accident. The total cost to repair the damages to your vehicle is $1,500. Your policy has a deductible amount of $500, which means you will need to pay $500 of the cost to repair. From there, your insurance will pay the remaining $1,000.

** When you select a low deductible, you will likely pay a higher premium. When you select a higher deductible, you will likely pay a lower premium since you’re taking more of the cost for a covered claim.

How much is my insurance deductible? Your deductible will always depend on your policy’s terms and what you choose. If you’re not sure what your current deductible amount is, you can find it in your policy documents. It is generally located on the Declarations page, near the front of your policy documents. Be aware some policies may have deductibles specific to certain types of loss apart from the standard deductible. For example, on a homeowner’s policy, a special wind/hail deductible could be a higher limit of $1,500 compared to a fire loss which may be at a lower deductible such as $1,000.

If you do not know what your deductible is, you can contact your independent agent or, if you bought your policy directly from an insurance company, you would need to call the insurance company’s customer service line.

What are insurance policy limits? Your insurance policy’s limit is the most your insurance will pay toward a covered loss.

If your covered damages exceed your limit, you may need to pay out of pocket for part of the loss. Therefore, working with an independent insurance agent is so important. They can help you calculate and set appropriate limits, so you don’t find yourself underinsured. Being underinsured is when you have insurance coverage, but the limits aren’t high enough to cover the full amount of your claim.

For most personal insurance policies, you will need to select a limit for both your property (your car, home, etc.) and your liability. Many types of policies have additional coverages you can add to help cover costs if you exceed your limit.

Contact Paroubek Insurance and get expert help from our insurance advisors to make sure you are adequately covered for all your insurance needs.



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