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Understanding Deductibles


Many insurance policies — particularly property, liability, and commercial-vehicle insurance policies — contain deductibles. A deductible is the amount you must pay your insurance agent before they'll begin to pay for the covered loss. For example, if floodwaters cause $10,000 worth of damage to your office building, and your property insurance policy has a $1,000 deductible, your insurance company will pay $9,000 after you pay your deductible.

In general, policies with higher deductibles have lower premiums. Your first instinct might be to select an insurance policy with a low deductible, but this might not save you money in the long run. Think carefully before you choose a policy with a lower monthly premium and a higher deductible; if you opt for this type of plan, you'll have to pay a higher deductible when an accident or incident occurs.


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