Your insurance deductible is the dollar amount you agree to pay out-of-pocket each time you have an accident/illness and make a claim under your coverage. In other words, your deductible is the predetermined amount the insurance company will "deduct" from the total bill and you will pay that amount. For example: If the total damage (home or car) or bill (medical or dental) comes to $3,000 and your deductible is $250, you would pay $250 and the insurance company would pay the remaining balance. It is important to understand however that if the total damage or bill is $200 and your deductible is still $250, you would be responsible for paying the $200.

Your insurance premium is the monthly cost of your insurance. This is the amount you are paying for the insurance company to assume the risk of when you will make a claim whether it is a medical illness, homeowner's claim or car accident. By raising your deductible you are assuming more of the financial burden should the worst happen so the insurance company can then charge you less. At first glance this seems like the best solution but careful research is needed before you make a decision.

Not all deductibles are good for everyone. It is really important that you choose the best deductible for you. Once you have found a reputable insurance carrier and have decided how much coverage is right for you, the decision about deductibles is the next step. Many people tend to choose the lowest deductible possible, not realizing they could be saving a considerable amount of money each year if they would accept a higher deductible. One word of caution here; if you feel that you would not be able to manage the larger deductible payment, if and when an accident or illness happens, it does not make sense to raise your deductible amount. Another factor to consider when looking at car insurance deductibles is your driving record. If you have a history of accidents, you will want to plan ahead based on those past trends.

As you shop for insurance, you should certainly consider the long-term impact of paying a higher deductible. Insurance analysts state that raising your deductible to lower premiums is known as a long term cost. This means that the cost you will recoup will occur over several months and years as compared to an immediate costs savings. However since most people have insurance for the long-term this is not necessarily a bad thing.
So many people may wonder what kind of money they can save by raising their deductibles. Keep in mind that the savings you will incur will vary widely by the type of car you drive, where you live and how often you use your medical insurance. Typically the biggest savings occur with raising the deductible on your car insurance. Insurance studies show that raising your car insurance deductibles to $500 can save you approximately 25% while taking them to $1000 can save you up to 40%. Homeowners can save about 15% by raising the deductibles on their home's insurance while medical deductibles being increased typically save you between 10-15%. Adding these up you can free up significant cash without serious risk and thereby increase your cash reserve.