Deductibles are one of the most important yet often misunderstood parts of an insurance policy. Whether you're insuring your vehicle, your home, or both, understanding how deductibles work can help you make smarter financial decisions and avoid costly surprises when you need coverage most.
At Barber Insurance Agency, we believe confident clients make better coverage choices. Let’s break it down.
What Is a Deductible?
A deductible is the amount you agree to pay out of pocket before your insurance coverage begins paying on a covered claim.
In simple terms:
• If you have a $500 deductible and experience $3,000 in covered damage, you pay $500 and your insurance pays the remaining $2,500.
• If the damage is less than your deductible, you are responsible for the full amount.
Your deductible represents the portion of risk you agree to share with your insurance company.
Auto Insurance Deductibles
For auto insurance, deductibles typically apply to:
• Collision coverage, which covers damage from accidents involving another vehicle or object
• Comprehensive coverage, which covers damage from events like theft, vandalism, hail, falling branches, or fire
Most drivers choose deductibles ranging from $250 to $2,000.
Here’s how your choice affects you:
Lower deductible
• Higher monthly premium
• Less out of pocket cost during a claim
Higher deductible
• Lower monthly premium
• More out of pocket cost if you have an accident
If you drive daily, park outdoors, or live in an area prone to storms, your deductible choice deserves thoughtful consideration.
Homeowners Insurance Deductibles
Homeowners insurance deductibles work a little differently.
There are generally two types:
1. Flat dollar deductible
A set amount, such as $1,000 or $2,500, regardless of the size of your home.
2. Percentage based deductible
Often 1 percent to 5 percent of your home’s insured value.
For example:
If your home is insured for $600,000
And you have a 2 percent deductible
Your out of pocket responsibility would be $12,000 before insurance pays
In disaster prone areas, certain perils such as hurricanes, wind, or hail may have separate higher deductibles. This is especially important to review annually.
Choosing the Right Deductible
There is no universal right answer, only what fits your financial situation and comfort level.
When deciding, ask yourself:
• Could I comfortably pay this deductible tomorrow if I had to?
• Would I rather pay a little more each month for peace of mind?
• Do I have an emergency fund that covers my deductible?
If you do not have cash on hand to cover a higher deductible, choosing a lower one may be the safer option, even if your premium is slightly higher.
Think of it as balancing:
Lower deductible equals higher premium and lower claim day stress
Higher deductible equals lower premium and higher out of pocket risk
Review Your Deductibles Regularly
Many insurers allow you to adjust deductibles during your policy term or at renewal. Life changes, income changes, savings grow, and home values shift. Your deductible should reflect your current financial reality.
An annual policy review is one of the smartest financial habits you can build.
We Are Here to Help
Insurance should not feel confusing. At Barber Insurance Agency, we take the time to walk you through your options so you can feel confident in your coverage and not surprised by it.
Not sure what deductible makes the most sense for your auto or home policy? Let’s talk through it together and find the balance that fits your budget and comfort level.
Contact our team today to schedule a coverage review.