Insurance is a vital aspect of our lives that helps us to manage the risks and uncertainties associated with different aspects of life. Insurance policies cover a wide range of areas, such as health, automobile, property, and travel, among others. While purchasing an insurance policy, it is essential to understand the various terms and conditions associated with it, such as the deductible or excess.
A deductible is a specified amount that an insured individual must pay before the insurance company starts paying the remaining amount. On the other hand, excess is a fixed amount that the insured individual must pay before the insurance company covers the remaining amount. These amounts are usually agreed upon between the insurer and the insured at the time of signing the insurance policy.
The deductible or excess serves as a form of risk-sharing between the insurer and the insured. By setting a deductible or excess amount, the insurance company is relieved of the burden of small claims, and the insured individual is incentivized to avoid making small claims, which could result in higher premiums.
The level of deductible or excess varies depending on the type of insurance policy and the insurer. For instance, a travel insurance policy may have a higher deductible compared to a car insurance policy. Additionally, some insurers may offer lower premiums for insurance policies that have higher deductibles or excess amounts, while others may charge higher premiums for policies with lower deductibles or excess amounts.
One example of an insurance company that offers lower premiums for higher deductibles is SafetyWing. SafetyWing is a global travel medical insurance provider that offers an affordable and comprehensive travel insurance policy for digital nomads, remote workers, and entrepreneurs. The company has a $250 deductible, which is relatively lower compared to other insurance providers. However, the lower deductible is offset by the fact that the company only covers expenses related to accidents or illnesses that occur during the insured individual's trip or within the certificate period (start and end date of the policy).
The premium or pricing of an insurance policy can vary depending on various factors, such as the age, health, and lifestyle of the insured individual. In addition, the level of deductible or excess can also influence the premium or pricing of an insurance policy. For instance, if an insured individual opts for a higher deductible or excess, they may be able to pay lower premiums. Conversely, if an insured individual opts for a lower deductible or excess, they may be required to pay higher premiums.
It is essential to understand the level of deductible or excess that comes with an insurance policy and how it affects the premium or pricing of the policy. This will help an individual to make an informed decision when choosing an insurance policy that suits their needs and budget.
For instance, let's say an individual is purchasing car insurance. If they opt for a policy with a higher deductible, they may be required to pay a lower premium. This could be beneficial for individuals who do not use their car frequently or who are confident in their driving abilities. On the other hand, if an individual opts for a policy with a lower deductible, they may be required to pay a higher premium. This could be beneficial for individuals who use their car frequently or who are not confident in their driving abilities.
Another example is health insurance. If an individual opts for a policy with a higher deductible, they may be required to pay a lower premium. This could be beneficial for individuals who are healthy and do not require frequent medical attention. However, if an individual opts for a policy with a lower deductible, they may be required to pay a higher premium. This could be beneficial for individuals who have pre-existing medical conditions or require frequent medical attention.
In conclusion, the level of deductible or excess is an essential aspect of insurance policies that should not be overlooked. It is crucial to understand the level of deductible or excess that comes with an insurance policy and how it affects the premium or pricing of the policy
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