Deductibles 101If you own a home or an auto, you understand that insurance is essential.  Not only for a legally mandated reason, but also for protection against claims that can and do happen to homes and autos.  The topic of insurance, alone, can be confusing for many, not to mention the discussion of deductibles. Once you experience a covered loss to your home or auto, you will most likely be confronted with a “deductible,” subject to the policy conditions on your Alabama insurance protection.  So, what is a deductible and how does it apply to you?

Confusion About Deductibles

Imagine your car is vandalized one night and when you submit the claim for the damages, you let out a big sigh of relief until you find out you still owe a portion of that claim.  This is what confuses many people.  A deductible is an amount the policyholder is responsible for, out of pocket, before the insurance company pays their portion of the covered loss. Deductibles may not be given much thought until you are faced with absorbing some of the cost of a claim that isn’t your fault, such as vandalism.

Keep in mind that insurance companies are not out to “make you pay” when a claim happens.  It is actually used as a motivational tool to encourage you to be more cautious and alert and thus, reduce the likelihood of losses that may happen to your home and auto.  Agreeing to absorb a portion of each loss should act as a deterrent and is designed as protection.

Losses and How it Applies to Your Deductible

For example, let’s say that you have a $500 deductible on collision coverage under your Alabama auto insurance policy.  You run off the road due to excessive speed and hit a guard rail, causing damages to the front end of your car.  The estimate to repair the damages to your vehicle is $3,200.  Your portion of the claim (deductible) is $500, and the insurer’s portion is the balance of $2700.

Keep in mind the higher your deductible, the lower your insurance premium will be. However, you can choose a lower deductible by discussing with your local Alabama independent insurance agent, but your premium would likely increase. Deductibles are typically applied “per incident” for auto and home, unlike a health insurance policy which are typically applied yearly.

If you have any questions about your current deductible on any of your insurance policies or wish to obtain a quote for a lower or higher deductible, feel free to contact our offices at Burkett Insurance Agency at 256-704-7400.  We are here for all your insurance needs!