Deductible
What Is a Deductible?
A deductible is the dollar amount you must pay on a covered claim before your insurance will pay.
This setup is designed so the insured and the insurance company share the financial risk.
Does Liability Insurance Have a Deductible?
It depends on the type of liability insurance and the insurance company. Your car liability insurance typically does not have a deductible. Commercial and business liability insurance may have one.
Most of Insurance Canopy’s general liability and professional liability insurance policies do not have a deductible.
How Do Deductibles Work With Liability Insurance?
When you file a claim with your insurance company, you must pay your deductible before insurance will pay the rest of the claim, as long as the rest does not exceed your coverage limits.
Depending on the policy, you either make a payment directly to your carrier or the deductible amount is subtracted from the claim payment.
While Insurance Canopy’s general liability insurance does not have a deductible, Gear and Equipment Coverage (also known as inland marine coverage) does have a deductible.
Example:
A musician purchases a new guitar. During an outdoor festival, their guitar is in a stand while they complete their stage setup. A large gust of wind causes a chain reaction that ends with the guitar and its stand falling off the stage. The guitar now has a broken headstock and a cracked body.
The musician has equipment insurance with a $250 deductible. After reviewing the claim, the company agrees to pay $1,000 to replace the instrument. The adjuster issues a check to the insured for the claim amount ($1,000) minus the insured’s deductible ($250), for a total of $750.
In this case, the insured “paid” their deductible by having it subtracted from the total claim settlement amount: $1,000 – $250 = $750.
When Do I Have to Pay My Deductible?
You only pay your insurance deductible when you have a claim. With most insurance policies, your deductible is always the same amount and applies to each claim you file.
For example, say you have a $250 deductible and two separate claims, one in March and one in July. You will pay your $250 deductible on the March claim and $250 on the July one.
Deductible vs Premium: What’s the Difference?
The deductible is the dollar amount you are responsible for paying on a claim. You only pay it when you have an insurance claim.
A premium is what you pay the insurance company to have coverage. You usually pay your premium monthly, annually, or semi-annually.
Deductible: You pay, but only on claims.
Premium: You pay on a set schedule, like rent or an electric bill. It’s the cost of your insurance policy.
Typically, the higher your deductible is, the lower your premium costs are. And the lower your deductible, the higher your premium.
$ Deductible → $$$ Premium
$$$ Deductible → $ Premium
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