Home Insurance: What are insurance deductibles and how they work?

The deductible is the amount that you agree to pay before your insurer pays the balance of your claim.
Do I have to pay a deductible every time I make a claim?
Not necessarily:
If your deductible is $0, you won’t have to pay for any portion of your approved repairs or settlement amount.
Some policies will waive your deductible when certain circumstances apply.
When your total claim hits a certain dollar value, for example, you might not have to pay your deductible.
Deductibles exist to keep insurance as affordable as possible.
Deductibles help prevent fraudulent claims and reckless behaviour.
If insurance policies didn’t have deductibles in place, some people could be tempted to damage their own things or act recklessly (two behaviours known as “moral hazards” in the insurance world) just because they knew their insurer would protect them. This becomes less tempting when they know that part of the repair bill will come out of their own pocket.
Deductibles also help prevent minor claims.
If an insurance company had to process a $150 loss and subsequent claim, they would need to employ more people, and that could drive up the cost of insurance, since the cost of processing these small claims would far outweigh the actual insurance payout. Deductibles help keep minor claims at bay.
Over time, false claim payouts can lead to higher premiums for everyone who has insurance, and implementing deductibles is just one way of preventing those fraudulent or false claims.
Deductibles help keep your money in your pocket.
Would you be comfortable paying the deductible amount out of your own pocket if you made a claim today?
If you choose a lower deductible, you’ll be responsible for less of the bill if you make a claim, but the cost of your insurance could be a little higher.
On the other hand, if you choose a higher deductible, the cost of your insurance will likely be lower, but you’ll be expected to pay the deductible if you make a claim.
With auto and strata unit owner policies, the rules and regulations can vary by province, and claims are handled according to the location where the claim occurs.
The amount you need to pay for your deductible could be different if you’re involved in an accident outside of your home province.
When you set your deductible, you’re agreeing to either fully cover those smaller claims or cover a portion of your repair costs for larger claims. When your insurer doesn’t need to invest in processing those smaller claims or paying the full amount, they’re able to share those savings with you through lower premiums.
Contact us at 604.255.4616 for all your insurance needs:
Commercial, Home & Auto