“This policy contains a clause which may
limit the amount payable.” Have you ever wondered what this means? You’ll see it
on the front page of most insurance policies. This refers to your deductible. When you suffer
a loss, there’s almost always a deductible to be paid. This could range from $200 to
$2,500 or even higher. Often earthquake deductibles will be a percentage of the amount of coverage
on your home. Deductibles help keep your premiums down.
How? Well, deductibles prevent payments being made on very small losses. This significantly
reduces an insurance company’s costs, thereby helping to keep everyone’s premium down.
If you have a low deductible, such as $200, you may be tempted to make claims on very
small losses. If you do, you could lose any “claims free discount” you may be enjoying.
Also, after a few small claims, you’ll likely see your base rate go up, possibly costing
you more than it would have cost to replace the small items yourself. A number of claims
could even result in the insurance company no longer offering you a renewal.
If you opt for a higher deductible, you’ll see a fairly significant saving in your premium
amount. Small losses may not be covered, but you’re really buying insurance to protect
yourself from a catastrophic loss, such as earthquake, fire, windstorm damage, water
damage, and break-ins. It may be worth your while to opt for a higher
deductible. You’ll save money, and by covering very small losses yourself, you’ll keep
your premium down. Your insurance will be there for you when you really need it!