Understanding your car and home insurance deductibles can mean the difference between making informed financial decisions and throwing good money after bad. Most people understand that a deductible is the amount the policy holder is responsible for paying whenever they file a claim. However, deductibles often have far more implications.

First, the dollar or percentage amount of your deductible affects the premiums you pay. A higher deductible generally means lower premiums. The lower the deductible is on the policy, typically the higher the premium. The key in choosing the right deductible isn’t all about your premiums, however. Choosing one that is too high leaves you at risk of being unable to afford the necessary costs to repair damages to your home or car. If you choose a deductible that is too low and you rarely or never file a claim, you’ve been paying too much for those high-priced premiums.

Unlike health insurance deductibles, those for auto and home insurance policies need to be paid each and every time you file a claim for damages. They do not carry over to the next claim. The majority of home and car insurance deductibles do not apply to liability claims, but only property damage. For example, let’s say you have a $2,000 deductible on your home insurance policy. If you filed three claims last year for $5,000, $8,000 and $3,000, your insurance company would have deducted that $2,000 from each claim, leaving you with $3,000, $6,000 and $1,000 in reimbursement payments.

Deductibles vary greatly from policy to policy and from insurance company to company. They can even be affected by the type of damage. Hurricane damage, for example, is often covered as a percentage of the policy limits and it’s often quite high. If your home insurance covers $250,000 in property damage and hurricane damage is subject to a 10 percent deductible, that means you are responsible for paying $25,000 of any claim.

The best way to choose the right deductible for the best policy is by contacting a knowledgeable, independent insurance agent. Our experienced agents can help you be certain your deductibles are set at the most efficient and cost affective rates. Contact us to find out if your deductibles are right for you and your budget.