Does increasing your deductible usually decrease the premium?

A deductible is the amount you pay for health care services each year before your health insurance starts paying. In most cases, the higher the plan's deductible, the lower the premium. Generally, your insurance premiums and deductibles have an inverse relationship. If you choose a lower deductible, you pay higher premiums, but you pay less out of pocket when you file a claim.

Generally speaking, the higher your deductible, the less you'll pay in premiums for an insurance policy. A deductible can be a specific amount in dollars or a percentage of the total amount of insurance in a policy. The amount is set according to the terms of your coverage and can be found in the statements (or on the front page) of standard insurance policies for homeowners, condominiums, renters and cars. A car insurance deductible is what you pay “out of pocket” on a claim before your insurance covers the rest.

Collision protection, all-risk, coverage for uninsured and personal injury drivers typically have an auto insurance deductible. You can generally choose between a low deductible and a high deductible. A low deductible means a higher insurance rate, while a high deductible means a lower insurance rate. If you live in a state where cracked windshields are common, you might want to choose a low car insurance deductible to replace your windshield.

If your car insurance deductible is greater than the cost of damage to your vehicle, you'll pay the full cost out of your pocket, since the insurer only covers damages that exceed the amount of the deductible. After you pay the amount of the car's deductible, your insurer will cover the remaining cost to repair or replace your vehicle. When a disaster occurs in your home or if you have a car accident, the deductible is subtracted or deducted from what your insurance pays to cover a claim. You can opt for a higher car insurance deductible because you're betting against having an accident, but if you've had accidents in the past and drive often on higher-traffic roads, you're more likely to file a claim and pay a deductible.

Understanding the role deductibles play in insuring a vehicle or home is critical to getting the most out of your insurance policy.

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