Deductibles are the amount that individuals must pay before the company will have their claims recognized. Think of this as service charge that you need to pay before being able to use the service. In simple terms, a company will require you to pay a certain amount, let’s say about $100, for to activate your claim for an amount that was agreed upon.
The reason for this is simple. It is to prevent or lessen the instances in which individuals claim minor damages. Companies see this as irrelevant and as a waste of time and resources.
The relationship of Deductibles with Premiums
Companies often offer cheaper premiums for people who choose to pay large deductibles. The companies reasoning is that if a person is willing to pay for more of the damages that they have incurred then it would mean that they are willing to be more careful and vigilant against accidents or any other circumstances and situations that will cause them to inconvenience themselves. This would prove profitable for the company.
Another possible reason for this is that higher premiums or higher amount a claimant pays from their own pockets, the lower the company will pay in case something bad happens and you claim for your right as their customer.
Better course of action
People usually ask what the better course of action is. The choices here are obvious, either you pay high premiums but in case of accidents or other circumstances you will pay lower deductibles or you pay for lower premiums but in case the need arises, you will need to pay higher deductibles before the company will help you.
This depends entirely on you. Both of these options have their own pros and cons but for this article we will talk about which is better for individuals in order to have cheaper insurance. If you are accident prone or usually get into car accidents and you usually have little or no spare money left to you, then you should go for the low deductibles high premiums since you will need to claim insurance quickly and will only need to dish out a relatively smaller amount of money.
The other option is for individuals who are careful and do not usually get into accidents. It is said that individuals usually pay the premiums even though they do not get the chance to claim for their insurance. Paying high deductibles reduce the price of their premiums