Understanding Deductibles and Premiums

Understanding the relationship between deductibles and premiums helps you make informed insurance decisions and find the right balance of cost and coverage.

What is a Premium?

Your insurance premium is the amount you pay for coverage, typically:

Paid monthly, quarterly, or annually
Based on your risk profile
Determined by multiple factors

What is a Deductible?

A deductible is the amount you pay out-of-pocket before insurance coverage begins:

Applies per claim or per policy period
Varies by coverage type
Affects your premium amount

How They Work Together

Higher Deductible = Lower Premium

You pay more if you have a claim
You pay less in regular premiums
Better for those who rarely file claims

Lower Deductible = Higher Premium

You pay less if you have a claim
You pay more in regular premiums
Better for those who may file claims

Choosing the Right Deductible

Consider Your Financial Situation

Can you afford the deductible if you need to file a claim?
Would a higher deductible create financial hardship?
Do you have emergency savings?

Consider Your Risk Profile

How likely are you to file a claim?
What's your claims history?
Are you in a high-risk area?

Consider Your Premium Savings

How much would you save with a higher deductible?
How long would it take to recoup the difference?
Is the savings worth the risk?

Common Deductible Amounts

Home Insurance

$500 - $1,000: Standard
$2,500 - $5,000: Higher (lower premiums)
$10,000+: Very high (significant savings)

Auto Insurance

$250 - $500: Low (higher premiums)
$1,000: Standard
$2,500 - $5,000: High (lower premiums)

Health Insurance

$500 - $1,500: Low
$2,000 - $5,000: Standard
$10,000+: High deductible health plans

Deductible Types

Per-Claim Deductible

Applies to each separate claim
Common in property insurance
You pay deductible for each incident

Annual Deductible

Applies once per policy period
Common in health insurance
You pay until deductible is met, then coverage begins

Split Deductibles

Different deductibles for different coverages
Example: Lower for collision, higher for comprehensive

Premium Factors

Your premium is determined by:

Coverage type and limits
Deductible amount
Your risk profile
Claims history
Location
Credit score (in some states)

Tips for Balancing Deductibles and Premiums

1. Start with Standard Deductibles: Then adjust based on needs

2. Build Emergency Fund: Before increasing deductibles

3. Review Annually: Your situation may change

4. Consider Your Comfort Level: Choose what you're comfortable with

5. Ask Your Agent: Get professional guidance

Working with TGI Agency

We help you find the right balance of deductibles and premiums by:

Analyzing your risk profile
Comparing deductible options
Calculating premium savings
Recommending optimal choices