What Is a Good Deductible for Insurance?
One sector that has become a staple for both economies and people in the insurance industry. For starters, in the U.S., insurance carriers contributed approximately 630 billion USD to the country’s GDP, as reported by the U.S. Bureau of Economic Analysis.
Additionally, insurance protects people from bearing the entire cost of unforeseen events as well as ailments.
For instance, getting a quality health insurance plan is vital. Such coverage’s ensure that you can afford affordable healthcare services. And in most countries, this is next to impossible without support from health insurers.
When choosing between different insurance coverage, people often come across varying deductibles. Are you too unsure about what is a good deductible for you? Here is a guide about deductibles that will help you!
What is a deductible?
Insurance deductible refers to the amount that you have to pay before your insurance provider begins covering your expenses.
Generally, most coverage plans require individuals to pay a fixed dollar amount deductible before the coverage kicks in. However, in some plans, the amount can also be a fixed percentage of the total expense.
For instance, let’s say you have a deductible of $2,000. Your healthcare services cost $5,000. You must first pay your share, and then the company will pay $3,000. On the other hand, if the deductible is a percentage, like 15 percent, then you will have to pay $1,500.
In case you have a deductible on your insurance coverage, you must first pay the amount you have to pay, and only after you do so will your claim get paid. Once paid, the insurer will proceed by paying the rest of the value.
Who decides the deductible?
You will have the liberty to select how much deductible you will have. You can choose between low and high deductibles.
However, know that there are certain insurance plans that have a minimum limit on their deductibles. This means that there is some amount that you will have to pay out of your pocket. You can opt for a high deductible, low deductible, and flexible deductible coverage plan.
So, how do you decide on your deductible? What is the right amount? This question is quite tricky as both high and low deductible policies have their pros and cons.
As a rule of thumb, remember that the higher is your deductible, the lower will the insurance cost you.
Pros and Cons of High Deductible Coverage
Insurance plans featuring high deductibles tend to have lower premium payments.
If you feel that you are likely to rarely use your insurance, then opting for a high deductible coverage is the right option for you. This is because it ensures that the premium expense you have to bear on a monthly basis is minimal.
Additionally, most deductible rates are already agreed upon when you consent to the insurance plan. Therefore, you are protected from inflationary pressures.
Let’s say you exercise your insurance two years after opting for insurance; you will still have to pay the same amount (in case of the fixed deductible), which means that when it comes to the value of money, you will be spending less.
This is also a good option for those who cannot afford low deductible plans, but still want some form of protection.
But, high deductibles mean that most of your expenses will become out-of-pocket, and you will rarely get to use your insurance. When it comes to health plans specifically, this can be quite inconvenient, especially since its need is not something you can avoid.
Pros and Cons of Low Deductible Coverage
Plans with low deductibles feature a significantly higher premium since the insurance provider has to bear a higher risk of you claiming for the expense. This might be the only demerit of such plans.
As an individual, you should opt for low deductible health coverage, specifically when:
- Your lifestyle makes you vulnerable to injuries.
- You have a chronic condition that makes regular doctor visits and medication a necessity.
- You are planning to have major surgery or are pregnant.
- You think you will be using health insurance regularly.
- The premium amount isn’t much of an obstacle for you.
So, which to choose?
There is no clear-cut answer to this question. There is no such thing as a universal appropriate deductible amount. It all comes down to the degree of your usability for the coverage and your financial standing.
The more you plan to make claims against your insurance company, the higher deductible you should choose. Talk to professionals before making the decision to ensure that you get the best deal.
Do your research and select the best insurance plan for yourself.
Regardless of what deductible amount you decide to agree to, always opt for insurance plans. This makes sure that you are well-protected against unforeseen events.