what is a deductible? and what is a premium

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PostPosted: Wed Feb 08, 2012 6:26 am   Post subject: what is a deductible? and what is a premium  

what is a deductible? and what is a premium

what is the difference between the two?

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PostPosted: Wed Feb 08, 2012 12:51 pm   Post subject:   

Deductible is the amount you will have to pay out of your pocket before your insurance pays the rest of the claim amount.



Premium is the amount you pay the insurance company as compensation for bearing your risks.



The difference should be clear now.

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PostPosted: Thu Feb 09, 2012 9:50 am   Post subject:   

To illustrate how your deductible works:



You have a $500 comprehensive deductible & a $1,000 collision deductible on your car insurance.



A vandal smashes your wind shield, and it costs $300 to repair it. $300 is under your $500 comprehensive deductible, so the insurance does not pay anything. If your car had more vandalism damage from the same incident, and the total cost to repair was $1,000, your insurance company pays:



$1,000 less your $500 deductible = $500.



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PostPosted: Fri Feb 10, 2012 9:50 pm   Post subject:   

While the example correctly does the math, using the windsheld was not the best choice, since almost all auto policies' comprehensive/other than collision coverage exempts windshields from the deductible for the very reason that no claims would ever be paid, except for some of the more exotic sports cars, such as a Ferrari or Lamborghini, the windshields of which can cost $2000-$3000 or more for the piece of glass alone.



Premium is the amount one pays for the benefit of the insurance contract. Deductible is what the insured pays as part of their "retention" of a small portion of the total financial risk the insurer agrees to cover.



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PostPosted: Sat Feb 11, 2012 2:25 am   Post subject:   

Auto insurance companies often waive the deductible if a windshield has a rock chip or small crack which can be repaired. If the windshield or glass needs to be replaced, your comprehensive deductible applies.



A vandal smashing your windshield is a situation where your comprehensive deductible applies.


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