If you have a policy you have surely wondered, what is the deductible in insurance? We know that insurers handle quite complicated terminology and for this reason, we are going to explain it to you in the simplest way possible.
How does the deductible work in Panama?
When insurance includes a deductible, the insured must bear a portion of the compensation costs for a claim or accident.
Let’s use an example to explain how it works. Let’s say you had a collision in your car and the collision deductible is $ 500. Once the damage has been analyzed, the insurer determines that the repair of your car has a cost of $ 2,500. Based on your deductible, you would have to pay $ 500 and the insurer would assume $ 2,000 or the difference. In other words, the insurer would cover 80% of the damages.
As this type of terminology can be quite confusing, at Eprezto we focus on communicating deductibles and coverage to you intuitively and graphically. This way you know exactly what you are buying and what you are getting into when quoting an auto policy.
The insurance does not cover you if the compensation cost is below the deductible
Any accident or eventuality that has an indemnity cost below the insurance deductible is not automatically covered by the policy. Let’s say for example your deductible is $ 1,000; one day you have an accident and the cost of compensation for the damage is $ 200. In this case, the insurance does not cover you since the cost is below the value of the deductible.
As you realize, insurers have implemented the deductible to avoid “overuse” of insurance. Although this may seem like a bad faith practice, the reality is that the deductible regulates the use of insurance so that insurers do not “go out of business”. Remember that claims payments are subsidized by everyone who pays a premium. If the insurer does not have what to pay with, no one would be covered.
In the same way, if you have an accident, report it to the insurer as soon as possible regardless of whether you think that it will not exceed the deductible amount. If you later realize that if you enter the deductible and report it too late, the insurer may not cover you.
The higher the insurance deductible, the lower the cost of the policy
One way to save or pay less for insurance is by increasing your deductible. The higher the deductible, the lower the price or the insurance premium. This is due to the simple fact that the insurer assumes less risk by employing a high deductible.
On the left, we can see a policy with a low deductible, and on the right one with a high deductible
The amounts of deductibles in insurance vary by insurer
Deductibles on insurance vary by plan and insurer. In other words, the deductible you pay at Internacional de Seguros or Sura is not the same. In conclusion, insurers have different methods or ways of calculating the deductible.
What type of insurance includes a deductible?
Some of the insurances that include a deductible in some of their coverages would be the following:
- Auto insurance (specifically in damages caused to the car)
- Residential or fire insurance
- Health insurance
- Boat insurance
- Aircraft insurance
Liability coverage does not include deductible
In coverage of civil liability or damages to third parties, there is no deductible, in this case, the insurers assume all the damages under a pre-agreed maximum limit. As long as the cost of compensation is below the limit, the insured does not have to put a penny.
Remember that liability coverage includes any damage you cause to someone else’s property (car, house, premises, etc.) and bodily injuries caused to third parties.
Let’s use an example to explain this concept: Imagine you crash a car and the repair of the car costs $ 8,000. If your limit for damage to someone else’s property is $ 10,000, the insurer will assume the full cost. If for any reason the repair cost is $ 12,000 (or exceeds the limit) the insurer would assume $ 10,000 and the insured the other $ 2,000.
The two types of deductibles that are included in an auto policy
Auto insurance has two types of deductibles that apply depending on the situation.
- The collision or rollover deductible: as the name indicates, this deductible applies if the car had a collision or rolled over on the road
- The comprehensive deductible: covers theft, theft, fire, lightning, flood damage, wrongdoing, and other eventualities
The collision deductible is always higher than the comprehensive deductible. This is because the probability of you crashing is higher compared to being robbed or your vehicle being struck by lightning.
Comprehensive deductible vs. collision on an auto policy
Differences between deductible, copayment, and coinsurance in health insurance
Many clients do not understand what deductible, copayment, and coinsurance are in health insurance. Since everyone transfers part of the cost to the insured it can be a bit difficult to differentiate one from the other. Below we explain each one.
- Deductible: The annual limit that the insured must pay before the insurer assumes the medical costs. Let’s say that if you suffer an eventuality and the medical cost is $ 2,000 and the deductible is $ 500, the insurer will assume $ 1,500. As in auto insurance, the insurer only begins to pay after the compensation costs exceed the deductible.
- Copayment: The copayment is a fixed fee paid by the insured if he or she has a medical visit or purchases a medicine. Unlike the deductible, this rate is fixed and only applies to medical visits and medications, it does not apply to operations and hospitalization expenses.
- Coinsurance: It is a percentage of the medical costs borne by the insured. Let’s say that if the coinsurance is 20%, the insured bears 20% of the indemnity costs and the insurer the rest. Once the annual deductible amount is exceeded, the insured begins to pay the copayment.
- Remember that in the same way, everything will depend on the plan you choose. That is why you must review your policy several times or consult an insurance broker.
