What is a deductible?
In an insurance policy, a deductible is a dollar amount that you
will be entirely responsible for, if an insured event occurs.
(i.e. house fire, auto collision or health care incident)
The reason you pay an insurance company is to have them take on financial risk for you.
Having a low deductible means the company will take on more risk, so they charge you more.
A higher deductible, in contrast, means less risk to the insurer and less premium cost to you.
See below for: Which is a better bet, low or high deductible?
Which is a better bet, low or high deductible?
If the annual premium savings is more than the difference between the deductibles, the higher deductible is the best best.
For example, imagine you are choosing between two health insurance policies: one with a $1,500 deductible is $200 per month and another with a $2,000 deductible for $150 per month.
The difference is $600 for the year. ($50 per month x 12)
If you don't have to use your deductible that year (and most people won't, most of the time), you will have spent the $600 for nothing.
On the other hand, if you do use your deductible, you extra costs were only $500.
In other words, do you want to pay $600 to avoid a possible $500 in changes?
If the saving in premium is not that much, the best choice would not be as clear.
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