What Are Insurance Deductibles and How Do They Work?
Kasey Helm 04/12/2016

To keep it simple, the deductible is the amount you pay out of pocket in the event of a claim. Have $5,000 worth of collision damage on your car, and a $500 deductible? The insurance company will pay out $4,500. Keep reading to see what deductibles apply to different types of insurance, and recommendations from us.

Auto, Motorcycle, RV, etc. Insurance Deductibles

On your auto insurance, if you have full coverage, you'll have comprehensive and collision deductibles (see here for an explanation of those coverages). We generally recommend keeping these deductibles at $500 or lower. While having lower deductibles may increase your premium, it will be worth it in the event your car is stolen or totaled and you're only out $500 or less.

Homeowners, Rental Properties, etc. Insurance Deductibles

Most of the time you will have one deductible for your home or property insurance (although some companies are offering separate deductibles for separate coverages now). To keep prices down we usually recommend going with $1,000 or higher for your homeowners insurance. You may be worried about a $700 TV or a $400 game system being stolen and not covered, however it's a good idea to only file larger claims on your home insurance to keep your premiums from going up.

Earthquake Insurance Deductibles

Earthquake deductibles are in a league all their own because they are percentage based, rather than a fixed number. We usually recommend the lowest deductible option available for earthquake, which is 5% in most cases. The percentage applies to the coverage amount; if your home is covered for $500,000 and you have a 10% deductible then your deductible would be $50,000.