why does having a higher deductible lower your insurance premiums?
Why does having a higher deductible lower your insurance premiums?
Answer:
Having a higher deductible can lower your insurance premiums because it shifts more of the financial risk of a claim from the insurance company to you as the policyholder. Essentially, by agreeing to pay a higher deductible in the event of a claim, you are taking on more of the cost burden upfront.
Insurance companies calculate premiums based on the level of risk they are taking on by insuring you. When you opt for a higher deductible, you are telling the insurance company that you are willing to cover a larger portion of the potential costs associated with a claim. This reduced risk to the insurer often results in lower premiums for you.
In essence, insurance is a trade-off between cost and risk. By choosing a higher deductible, you are demonstrating to the insurance company that you are comfortable taking on more risk in exchange for paying a lower premium. It’s important to weigh the potential savings against the financial responsibility you would have if you need to make a claim before deciding on the deductible amount that is right for you.