Understanding The Insurance Claims Process Part 1. Deductibles.

Eventually, no matter how careful you are, just about everyone makes some sort of insurance claim. If we are lucky, the only kind of insurance claim we will end up with on our “permanent record” if that time our family makes a claim on our life insurance policy. That one, unfortunately, I cannot help you with – I don’t sell life insurance, and I sure as heck don’t know what happens when you shuffle off this mortal coil. Maybe I can’t help with that, but I can help you understand your property claims a little better so that if or when you make a claim, you won’t wish that death was an option.

I want to start of by putting this right out front – I am not here to tell you that you should not make a claim. You pay for insurance to protect you and your stuff, and that’s what it’s there for. That being said, if you want to be able to make a claim anytime, anywhere, for anything,  then be prepared to pay for the privilege. It’s not that the companies don’t want to pay you, or that they want to get all their money back right away – it’s just that you need to understand that insurance is for a disaster. While it may seem like a disaster that your sister in law spilled her red wine on your white carpet, it’s not something you want to claim on your homeowners insurance.

First, I will explain deductibles.  The deductible is the amount of the claim you must pay for yourself. Auto insurance deductibles generally range between $0 and $1000. Sure, you can go higher, but if you do that, your car had better be worth quite a bit of money. Most clients in our insurance agency generally carry a $500 deductible. We find that to be generally the best value, insurance wise. Most times, the savings in premium switching between $500 and $1000 is pretty negligible, and not enough to make the higher deductible worthwhile. Be sure to go over your deductible options with your insurance agent, but be smart. If your car is worth $2000 and you carry a $1000 deductible, you are saving a few dollars but losing most of the value of your car in the event of an accident. Yes, getting $1000 is better than a kick in the teeth, but on a car of that value, the price of a $100 deductible isn’t going to be very high, so maximize your return, should something happen.  Likewise, if you have a brand new S class Mercedes, then maybe going with the $100 deductible isn’t the best way to spend your money. Presumably, you are doing alright, and a $1000 deductible on your very expensive car isn’t going to put you on the street.

Home insurance deductibles are a bit different, and are generally a percentage of the insured value of your home, at least here in Texas. For most clients, 1% is the sweet spot, premium wise. Be sure to discuss the options with your agent though, as sometimes a fixed dollar amount deductible can be purchased. $500 – $1000 – it’s your decision to make, ultimately. I would advise you to choose as high a deductible on your home as you can afford, and in the next blog post, I will explain why. Making a claim can be a big decision, and one you should not take lightly. I will explain that as well in the next insurance blog post.