Insurance deductible can often be a source of frustration for policyholders who purchase insurance and then at the time of a claim are asked to pay an amount to their insurer. Many policyholders find this confusing and brokers often get asked “but isn’t this what I’ve been paying premiums for”?
Insurance allows a group of people to share the risk of unforeseeable and costly expenses. Instead of one individual being burdened with a costly loss, a group of people contribute to a pool of money which they are all eligible to withdrawal from should the unfortunate need arise. The deductible is simply a way to hold the person making a withdrawal accountable for a portion of the loss.
So How Does the Deductible Work Exactly?
The deductible is a flexible amount and is generally decided on by the policyholder based on how much risk he/she is willing to accept. Although policyholders are often tempted to raise their deductibles in order to lower premiums it is important to understand that the deductible must be paid as a lump sum at the time of a claim.
In the trucking industry a standard deductible is around five thousand dollars but can be upwards of twenty-five thousand. So the question becomes, could you pay for the deductible on your policy without substantially affecting your family’s finances or your business? For many, the answer to this question is no.
Owner/Operators with their own authority have some flexibility when purchasing an insurance policy to set their deductible at an amount they would be comfortable paying. Unfortunately, however, most Owner/Operators are often not able to decide on their deductible since the primary insurance policy is owned by the carrier.
Deductible Buy Down
Deductible Buy Down insurance is a product offered by National Truck League which offers a solution to this problem. The coverage essentially lowers the deductible on a policy from five or ten thousand dollars to a more manageable amount such as one thousand or twenty-five hundred.
Understanding the details of your insurance policy and ensuring it will work properly for you at the time of a loss is essential to having a smooth claims experience should the unfortunate circumstance arise. If there are gaps in coverage or you are uncomfortable with the deductible on your policy, it is important to research your options and find the best solution to protect yourself, your family and your business.