Insurance brokers are quite aware of the balance clients seek when determining which deductible is right for them. Many will attempt to find a premium that works into their financial plan without leaving them too exposed if they need to file a claim. The problem with insurance deductibles is there are no straightforward answers for every client. Many have to spend a lot of time researching and analyzing how reliant they are on their coverage before determining if a high or low deductible is the right option for them.
The Pros and Cons of High and Low Deductibles
Most insurance brokers and agents will agree that their clients often prefer a lower insurance deductible, so if they file a claim, they will pay less out of pocket. This is true for all insurance policies, including health and auto insurance.
The benefits of a low deductible also come with a high price tag. Drivers who opt for a lower deductible for their car insurance policy will pay much more for their premium than if they chose a higher deductible. However, there are downsides to choosing a higher deductible. While your clients may enjoy the advantage of paying less upfront for their premiums, a higher insurance deductible means expensive out-of-pocket costs if they file an accident claim.
With healthcare plans, they are typically offered in three to four different packages, each with varying deductibles. The lower-priced plans often have the highest deductibles, while the most expensive plans will have the lowest insurance deductibles. A client who purchases a lower-priced health insurance plan may pay around $1,500 in deductibles and only $500 in monthly premiums. A higher-priced plan may require $600 in deductibles but as much as $1,600 or more each month in premiums.
Looking to better gauge your insurance clients’ pain points? Learn more in this article.
What Your Clients Should Consider When Choosing an Insurance Deductible
One of the main things all policyholders should consider with insurance deductibles is their financial situation. Your clients must consider the amount of money they could realistically pay out of pocket if they were involved in an accident or otherwise required major surgery.
With car insurance, most companies have a range of deductible levels, with most being between $0 and $1,500. The amount of the insurance deductible will have a direct influence on the premium your client pays. It is essential to remind them that a higher deductible may lower their insurance premium. Still, those savings will not add up to much if they cannot afford to pay for damages and repairs following an accident.
The client’s driving record is another factor that should be taken into consideration when choosing an insurance deductible. A driver who’s had many accidents will have a higher premium than a driver with a clean record. New drivers who have never taken out an insurance policy before may also pay more for their insurance than someone who has held a policy for years.
Is it Worthwhile to Choose a Higher Deductible?
Paying more out of pocket for damages and repairs is only a worthwhile option if it lowers the premium significantly. Raising the deductible is only helpful if the client can afford to pay the higher fees when they file a claim. If paying out $1,000 after an accident would seem impossible for your client or would put them in a bad financial position, it would not be wise for them to go with a higher insurance deductible. The money they would save on their premium would not be enough to pay for car repairs or to purchase a new vehicle if their car was totaled. If paying out of pocket for an accident would have a negative impact on your client’s overall quality of life, then choosing a lower deductible would be the best long-term option for them.
Helping Your Clients Make the Right Decision
Choosing the right option for a deductible can be a confusing experience for many policyholders. At the end of the day, the choice of a high or low insurance deductible is entirely up to the client. As an insurance agent, it is your duty to help your clients understand the pros and cons of high and low deductibles and to provide guidance on which option they should choose.
Remind your clients that while they can save money on their premium with a higher deductible, there is no way to predict if or when you will need to file a claim. And if the idea of paying too much out of pocket for repairs, damages, and other fees concerns them, it may be best to suggest a lower deductible instead. Take all factors into consideration and keep in mind that no two clients are the same. Each one has their own specific needs, and that is why the choice of a high or low insurance deductible is available to them.
