What Is an Insurance Deductible?
After protecting Tennesseans for 75 years, we’ve seen far too often what happens when people don’t understand their insurance, what it covers, or how it protects them. Your insurance works harder for you when you understand it. That’s why we are committed to educating Tennesseans on how things like their deductibles work (or what even is a deductible). There are no silly questions here. Let’s get started:
What is a Deductible?
A deductible is the amount you agree to pay out-of-pocket before your insurance policy kicks in. Think of it as your financial “team contribution” to a claim. If your deductible is $1,000 and you file a claim for $5,000 in damages, you are responsible for covering the first $1,000. Then, your insurance policy will typically kick in to cover the remainder. It’s crucial to remember that deductibles apply separately to different parts of your policy. Your home and auto deductibles are likely different in amounts and will be independent of one another. That’s by design, since each type of coverage deals with different types of risk and costs.
How do deductibles work for home insurance?
For homeowners, a deductible applies to covered losses like fire damage, windstorms, theft, or vandalism. Let’s say a fallen tree damages your roof and causes $10,000 in repair costs. Assuming this is a covered cause of loss, with a $1,000 deductible, you’d pay that amount, and your insurance company would handle the rest. Something to keep in mind: Some policies include separate deductibles for wind or hail—this can be especially important in Tennessee.
How do deductibles work for car insurance?
When it comes to auto coverage, deductibles come into play for both collision (your car hits something) and comprehensive (non-collision events, like theft or hail). If you have a $500 deductible on collision and get into a covered fender-bender that causes $3,000 in damage, you’ll pay $500, and your insurance should cover the remaining $2,500.
How do I choose the right deductible?
You typically have a choice in how much your deductible is—but there’s a trade-off. Choosing a higher deductible means you’ll have lower monthly premiums, but you’ll be responsible for paying more if you file a claim. Conversely, if you choose a lower deductible, you will pay a higher monthly premium. Choosing the right deductible helps balance your monthly budget with financial protection. Here are some tips:
Assess your budget. How much can you comfortably pay in the event your home or car is damaged? A higher deductible could help you save on premiums, so you would pay less every month but be responsible for more in case of damage.
Think about your circumstances and habits. Drive a lot or live in an area prone to storm damage? A lower deductible might make sense—even if premiums are a bit higher.
Compare quotes with different deductibles. Testing a $500 vs. $1,000 vs. $2,500 deductible can help you find the balance of cost and protection that fits your lifestyle.
You can usually change your deductible if you need to. Just reach out to your Farm Bureau Insurance agent to discuss. At Farm Bureau Insurance of Tennessee, we’re committed to helping you find coverage that fits your needs. Want help comparing deductible options for your home or auto policy? Chat with one of our knowledgeable local agents today—because your peace of mind is always worth protecting.
