Understanding Deductibles

Understanding Deductibles


Reading your insurance policy can be similar to learning a new language. There are countless terms and phrases that are difficult to interpret and insurance deductibles are on that list. 

What is a deductible?

The “deductible” is the amount that you agree to pay out of your own pocket before the insurer will step in and pay the remaining balance of a claim. 

Example: A tree branch falls on the roof of your car leaving some damage. You bring it to the shop and the repair bill is $1,500. If your deductible is $300, that means that you’ll pay $300 out of your own pocket to the repair shop and your insurer will pay the remaining $1,200. If in the event your car is totalled or not worth repairing, your insurer may pay you the actual cash value of your car instead – in this scenario, your deductible would be subtracted from the total payout. 

Do I have to pay a deductible every time I make a claim?

Not always.

• If you have a deductible of 40, you will not have to pay for any portion of your approved repairs or settlement amount

• Some policies will waive your deductible when certain circumstances apply. For instance – if your total claim hits a certain dollar value, you might not have to pay your deductible. 

Picture this scenario – After a fire, you make a home insurance claim of $50,000 for repairs. Your deductible is $1,000 but your policy states that this deductible does not apply if a single claim adds up to more than $25,000. In this case, since the claim is more than $25,000, you don’t have to pay your deductible.

• Some policies can have different deductible amounts for different types of coverage, which means that you may or may not have to pay, depending on the coverage you use for that specific claim. In some cases, your insurer can determine if your claim will be covered by more than one section of your policy, they’ll also do the math and determine how much of your deductible you’ll need to pay.

Example: Your car insurance policy says that your deductible is $0 when an accident isn’t your fault and $500 when it is your fault. If you get in a fender-bender on your way home from work and your insurer determines the accident was the other driver’s fault, they would then decide to fully cover the damage to your vehicle (up to your policy’s limit, of course) which means you pay $0. In some cases, your insurer may determine that you and the other driver were equally responsible which means you may only have to pay 50% of your deductible.

How do I know if I’ve chosen the right deductible?

The best way to determine if you have chosen the right deductible is to ask yourself this one simple question: Would you be comfortable paying that deductible amount of your own pocket if you made your claim today? 

By choosing a lower deductible – you’ll be responsible for paying less of the bill if you make a claim but the cost of your insurance premium could be a bit higher. On the other hand, if you choose a higher deductible, the cost of your insurance premium will be lower but you’ll be expected to pay that deductible amount if you make a claim. 

For more information on your deductible or to get a second look on your policy, speak to one of our insurance representatives today at 905-696-9090 or email us at This email address is being protected from spambots. You need JavaScript enabled to view it. 

Source: Economical 


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