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Zero Deductible Insurance: The Pros And Cons

Jan 16, 2008
Insurance that has no deductible sounds absolutely wonderful since we are sometimes stuck in the "you must meet the deductible before" trap. This is true for health insurance, property insurance, and car insurance. Luckily life insurance doesn't have a deductible to meet or beneficiaries would be in trouble.

First of all, one must understand what the deductible means for the most common forms of insurance:

Health Insurance: Usually you are required to choose a deductible when signing up for health insurance. The higher the deductible, the lower your premiums. However, you must meet that deductible in the form of how much healthcare you have to pay for before your health insurance provider will give you the full coverage of the policy. This can exist on an individual and/or a family level. An example is an individual who has a $500 deductible and must pay $500 toward their healthcare bills before the full benefits of their policy kicks in. These deductibles can be hundreds or even thousands of dollars, depending on what the policy holder chooses.

Property Insurance: This comes in the form of homeowners insurance and insurance on various other pieces of property. If the property is damaged in some way, there are stipulations within the insurance policy that says a certain amount of money must be paid by the policy holder before the insurance will do anything toward repairing or replacing the damaged property. Sometimes this doesn't work if the property damaged is not worth the amount of the deductible.

Car Insurance: Car insurance has deductibles depending on the kind of damage that has occurred to the car. If there has been a collision, then chances are there will be a deductible that must be met before any repairs are paid for by the insurance company. Since collisions result in thousands of dollars in damage to a vehicle, something such as a $250 or $500 deductible will save money instead of having to pay for 100% of the repairs. Occurrences such as vandalism and theft do not have a deductible.

There are other types of insurance such as travel insurance, renter's insurance, and business insurance that may require deductibles, so apparently there's a reason for having a deductible other than it being the amount of a claim that is not covered by the insurance company. It does give the insurance a bit of a financial edge so that they can continue to produce low premiums with reasonable deductibles. What about the insurance policies that don't have deductibles?

No matter the kind of insurance you have, there are some available that do not require deductibles. This can be beneficial in that coverage is provided without having to meet that annoying deductible, but what about the quality of the coverage? Sometimes with non-deductible insurance, the insured may have to eventually pay a deductible amount if there are too many claims on the policy. The quality of the coverage may not be as good as a policy with a deductible as far as the items in small print go. There may be more restrictions in coverage and stricter limitations as far as what is covered goes.

What it comes down to is that insurance with a deductible may provide you with better coverage, lower premiums, and have less underlying clauses. Non-deductible insurance, on the other hand, is cheaper in that you have no deductible and the premiums may be comparable to deductible insurance, but you may run into situations where you are limited on what you can claim and you may find that you will eventually have to pay a deductable anyway, otherwise the insurance company is only receiving money made from premium payments to provide their clients coverage.
About the Author
Zero deductible insurance does not necessarily save you money. The coverage is often inadequate and premiums are often higher. It's important to always get an insurance quote when shopping for insurance.
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