Zero Deductible Insurance – The Pros and Cons

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A policy that does not have a deductible sounds wonderful, as we can sometimes be caught in the “you must pay the deductible before …” trap.” This applies to car, health, and property insurance. Life insurance does not have a deductible. Otherwise, beneficiaries could be in serious trouble.

First, it is important to understand what the deductible for the most common forms of insurance.

o Health: When signing up for insurance, you will usually be required to select a deductible. Your premiums will be lower if you have a higher deductible. You must pay the deductible before your insurance provider will provide you with full coverage. This can be a family or individual deductible. A person with a $500 deductible must pay $500 towards their healthcare bills before they can receive the full benefits of their policy. These deductibles may be hundreds of dollars or thousands depending on the policy holder.

o Property: This can be homeowners insurance or insurance on other property. The policy will require that the policy holder pay a certain amount to repair or replace damaged property if it is damaged. This may not work if the property isn’t worth the deductible.

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o Car: The type of damage to the vehicle is what determines the deductible. There will likely be a deductible if there is a collision. This will prevent the insurance company from paying for any repairs. A collision can cause thousands of dollars of damage to a vehicle. Therefore, a $250-500 payment is a cost-saving measure that will not result in the need to cover 100% of the repair costs. There is no deductible for theft and vandalism.

Other types of insurance, such as renter’s and travel insurance, may also require deductibles. This gives the insurance company a financial advantage so they can continue to offer low premiums and reasonable deductibles. What about insurance policies without deductibles?

There are many options that don’t require deductibles, regardless of what type of insurance you have. While this can be advantageous in that the coverage is not subject to a deductible, it does affect the quality of the coverage. If there are multiple claims, non-deductible insurance may require the insured to pay a deductible. In terms of small print, the quality of coverage may be less than a policy without a deductible. You may have more restrictions regarding coverage or stricter limits as to what is covered.

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It comes down to this: insurance with a higher deductible can provide better coverage, lower premiums and less underlying clauses. While non-deductible insurance is generally cheaper because you don’t have a deductible, the premiums can be comparable to deductible. However, you might find yourself in situations where you cannot claim the full amount of your policy. You may also have to pay a higher deductible, as the insurance company will only receive money from premium payments.