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Higher Premium? Lower Deductible? Choosing the Best Policy for You

Higher Premium? Lower Deductible? Choosing the Best Policy for YouPeople with cars, homes, and health insurance policies understand the importance of insurance. As Chris Rock once stated, insurance policies are policies in case something happens. In the event something does happen to a person’s health, car, or residence, policyholders are familiar with premiums and deductibles.

Even more important, policyholders are familiar with how premiums and deductibles are influenced by one another. The lower a premium, for example, the higher the deductible is that the policyholder must pay, and vice versa. However, one topic for debate has been which option is truly beneficial for the policyholder. Are lower premiums and higher deductibles more beneficial, or are higher premiums and lower deductibles the better option?

Either option depends on the policyholder’s financial situation. Policyholders who want to pay a lower price for their insurance policy each month will opt for a lower premium and higher deductible. If a person feels that they are financially capable of paying a higher deductible and do not need the additional coverage, that option would be beneficial for them. However, what happens when disaster strikes?

What is a deductible?

A deductible is a determined amount that a policyholder must pay before their insurance company pays for the majority of all of their claims. There are several reasons why insurance companies incorporate the use of deductibles. The first reason is to ensure that the policyholder has shared the cost of their claim. Before insurance companies pay for their portion of the claim, the policyholder must pay all of their deductible.

The second reason is to ensure the moral obligation of the policyholder. Paying a deductible is one way that insurance companies ensure that the policyholder acts responsibly and in good faith. For example, the deductible on a person’s auto insurance policy ensures that the driver will operate their vehicle in as safe a manner as possible in hopes to avoid paying the deductible for comprehensive and collision damage.

The final reason insurance companies incorporate deductibles in a policy is to ensure a form of financial stability for the policyholder. The structure of a policy helps to protect the policyholder from catastrophic loss. The deductible is a great safety net between any minimal loss and a serious catastrophic loss for the policyholder. Without a deductible on an insurance policy, the insurance company would have to pay the entire claim, no matter how minor. This would lead to an increase in financial costs on many policies.

What is a premium?

This is how much you pay each month for insurance. The amount you pay correlates to the amount of insurance you have. So, if you buy the minimum amount of insurance, your premiums can be low. If you buy more insurance, your premiums will be higher.

How do premiums and deductibles affect each other?

It depends on the policy. If you have a high deductible – meaning, you have to pay a lot before the insurance kicks in – then your monthly premium may be lower. If you have a low deductible, your monthly premium is likely to be a lot more.

Benefits of a higher premium and lower deductible

In the event of a disaster, like a fire or storm damage, you will pay less money upfront. This means your insurance policy kicks in faster to cover the rest of the damage. For some policyholders, especially those in areas where additional policies are required for hurricanes or floods, spending more each month is an economically sound decision. Higher coverage limits can also lead to additional discounts and benefits for policyholders, too, specially if they bundle.

Benefits of a higher deductible and lower premium

When you pay a lower premium, you may be able to balance your budget more easily. You’ll know what you have to pay each month (even though premium increases are likely). And if you have multiple policies – again, for things like hurricanes or floods – keeping premiums low can help ensure that all of your coverage is paid for and available when disaster strikes.

No matter what options you choose, if your claim is denied, we are ready to help. The Warhurst Warriors fight for policyholders who have lost everything. We’ve taken on the national insurance companies and won. If your claim has been delayed, denied, or lowballed, it’s time to get tough.

At Warhurst Law, you get all the insights of a former adjuster who’s also an attorney. That means you can rest easy, because you know for certain that you are protected by an experienced team who puts your interests first. Call the insurance dispute attorneys when you are dealing with insurance companies that won’t pay. Call 251-207-1296 or complete our contact form to make an appointment. We proudly serve Florida, Alabama, Louisiana, and policyholders throughout the Southeast.