Many of us don't understand the insurance policies we get, and this can lead to major problems down the road if you end up needing to make a claim. One misunderstood part of any insurance policy is the deductible, or the amount you agree to pay if you file a claim. These are not too hard to understand, and your deductible is an important factor in how much you pay each month. Here are five must-know facts about them.

1. Your insurance company can require you to pay it first.
Most insurance companies will require you to pay the full amount before they will contribute a single cent towards a claim. Therefore, if you have a $1,000 deductible, any damage under this amount will most likely be paid for entirely by you. If you have $2,000 of damage from a tree falling on your roof, you will need to pay the first $1,000 before they pay the second amount. This means you essentially need to be ready to pay this amount at any given time. If you have a higher deductible and you can afford it, keep a separate bank account with an emergency fund at least so that you can pay this amount upfront without stressing or getting loans.

2. A lower deductible means higher premiums.
When you're shopping for home insurance policies, try several different deductibles and see what the cost savings per month would be. If you notice a major difference, consider a slightly higher one. Having a policy with a $1,000 deductible is significantly cheaper than one with$500, and over the course of a few years, you may find that you save the extra $500. Of course, it's also a gamble against the likelihood of something happening where you end up having to pay that amount. If you are the worrying type, get a lower deductible, but if you can stomach a little risk and want to save money, choose a higher one.

3. You can change your deductible with your insurer.
If you already have a home insurance policy, you can call the insurer and ask about increasing your deductible. This is a great way of saving money on an existing policy. Just be sure to understand any up-sells or extra features they try to offer, and ask what you will be saving by increasing it before you agree to do it. You may not be able to do it in the middle of a contract, but you can record it so that the change will go into effect when your policy is renewed.

4. Deductibles don't always apply.
In certain cases, you may not have to pay a deductible before your insurance company will help. It is generally up to them to require you to pay it, so in certain crises that you don't cause, they might not enforce it. You may also be able to call them and ask to have the deductible waived. If you truly don't think you should have to pay it and can make a sound case to back up your opinion, call them and reasonably explain why. Also, check your policy before you purchase to see what situations may automatically waive them.

5. Deductibles can be a percentage.
Though the typical deductible is a flat dollar amount, some in the form of percentages are common in certain situations. For instance, if your home is hit with a hurricane, you may have a 1 percent deductible, which means you pay 1 percent of the value of your home, or you could even have one as high as a 5 percent. This means you may end up paying $10,000 or more out of pocket before your insurance company will step in and help and in many ways, is quite a gamble to take.

These five facts are important to know while you're shopping for a home insurance policy. Make sure you ask about the deductible before you sign up for any insurance policy.

Understanding Insurance

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