Is an amount of money regularly paid to an insurance company for a policy?

A deductible is the amount of money that you are responsible for paying toward an insured loss. When a disaster strikes your home or you have a car accident, the deductible is subtracted, or "deducted," from what your insurance pays toward a claim. Deductibles are how risk is shared between you, the policyholder, and your insurer.

Generally speaking, the larger the deductible, the less you pay in premiums for an insurance policy. A deductible can be either a specific dollar amount or a percentage of the total amount of insurance on a policy. The amount is established by the terms of your coverage and can be found on the declarations (or front) page of standard homeowners, condo owners, renters, and auto insurance policies.

State insurance regulations strictly dictate the way deductibles are incorporated into the policy's language and how deductibles are implemented. These laws can vary from state to state. 

How deductibles work

A specific amount would be subtracted from your claim payment if you have a dollar amount deductible. For example, if your policy states a $500 deductible, and your insurer has determined that you have an insured loss worth $10,000, you would receive a claims check for $9,500.

Percentage deductibles generally only apply to homeowners policies and are calculated based on a percentage of the home’s insured value. Therefore, if your house is insured for $100,000 and your insurance policy has a 2 percent deductible, $2,000 would be deducted from any claim payment. In the event of the $10,000 insurance loss, you would be paid $8,000. For a $25,000 loss, your claim check would be $23,000.

Note that with auto insurance or a homeowners policy, the deductible applies each time you file a claim. There are exceptions to this practice in Florida and Louisiana, where hurricane deductibles are applied once per season rather than for each storm.

Deductibles generally apply to property damage, not to the liability portion of homeowners or auto insurance policies. For example, with a homeowners policy, a deductible would apply to property damaged in a rogue outdoor grill fire; however, there would be no deductible against the policy's liability portion if a burned guest made a medical claim or sued.

Raising your deductible can save money

One way to save money on a homeowners or auto insurance policy is to raise the deductible. Therefore, if you're shopping for insurance, ask about the options for deductibles when comparing policies.

Increasing your auto insurance's dollar deductible from $200 to $500 can reduce optional collision and comprehensive coverage premium costs. Going to a $1,000 deductible may save you even more. Most homeowners and renters insurers offer a minimum $500 or $1,000 deductible, and raising the deductible to more than $1,000 can save on the cost of the policy.

Of course, remember that you'll be responsible for the deductible in the event of loss, so make sure that you're comfortable with the amount. 

Homeowners disaster deductibles

Standard homeowners insurance covers wind and hail damage from storms and hurricanes. Flood and earthquake policies are purchased separately. But each of these disasters has its own deductible rules. If you live in an area with a high risk for one of these natural disasters, understand how much deductible you will need to pay if a catastrophe strikes.

Start here, check your policies and speak to your insurance professional to learn exactly how your deductibles work.

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There are 41 million people in the U.S. who say they need life insurance but do not have it, according to the 2020 Insurance Barometer Report from industry groups LIMRA and Life Happens. This can partially be explained by the tendency of people to overestimate its cost.

Perceptions about affordability and value can deter people from buying the life insurance they need. More than half of respondents in the Insurance Barometer Report said a $250,000 term life insurance policy for a healthy 30-year old would cost $500 a year or more. But the average cost is closer to $160 a year. That’s a pretty big discrepancy in perceived cost versus actual cost.

Here’s a breakdown of what you need to know about getting the best life insurance so you can make an educated decision.

What Is Life Insurance?

Life insurance is a contract between you and an insurance company. Essentially, in exchange for your premium payments, the insurance company will pay a lump sum known as a death benefit to your beneficiaries after your death.

Your beneficiaries can use the money for whatever purpose they choose. Often this includes paying everyday bills, paying a mortgage or putting a child through college. Having the safety net of life insurance can ensure that your family can stay in their home and pay for the things that you planned for.

There are two primary types of life insurance: term and permanent life. Permanent life insurance such as whole life insurance or universal life insurance can provide lifetime coverage, while term life insurance provides protection for a certain period.

What Does Life Insurance Cover?

Life insurance covers all causes of death, with one main exception: Suicide within the first two years of owning the policy. Apart from that exclusion, life insurance covers death from illness, disease, accidents and homicide.

Regardless of the cause of death, a life insurance company could deny a claim if it believes there was misrepresentation on the life insurance application, especially if the death is within the first couple of years of owning the policy. For example, if someone lies about their health or other information on the application, the life insurance company could deny a claim by the beneficiaries.

In other extremely narrow cases, a life insurance claim could be denied if the beneficiary killed the insured person, or if the claim is disputed by someone who says the policyholder was coerced into changing the beneficiary.

Best Life Insurance Companies

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Compare quotes from participating carriers via Policygenius.com

See the full list: Best Life Insurance Companies of 2023

Main Types of Life Insurance

Term Life Insurance

In addition to being the most affordable type of life insurance, term life insurance is the most popular type of life insurance sold (71% of purchasers) according to the Insurance Barometer Report.

Term life insurance provides coverage for a certain amount of time and the premium payments stay the same amount for the duration of the policy. Typical choices are policy lengths are 10, 15, 20, 25 or 30 years.

If you pass away within the term of your policy, your beneficiaries can make a claim and receive the death benefit money, tax-free.

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How much annual income would your dependents need?

How long would your dependents need financial support?

2/3

Let's calculate your life insurance need

How much debt do you need to pay off?

If you want to help with the cost of college tuition, how much would you like to cover?

How much do you want to add for burial expenses?

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Let's calculate your life insurance need

How much savings do you have?

If you already have life insurance, enter the total coverage amount

Details that you have entered

How much annual income would your dependents need?

30,000

How much debt do you need to pay off?

160,000

How long would your dependents need financial support?

16 years

If you want to help with the cost of college tuition, how much would you like to cover?

How much do you want to add for burial expenses?

160,000

How much savings do you have?

160,000

Enter total coverage amount of existing life insurance

160,000

Now that you have an estimate of your life insurance need, you can start comparing quotes

Your savings and/or current life insurance total more than your needs. In this case, you may not need life insurance. If you want to exclude your savings or life insurance from the assets your family could spend, please lower the amounts input.

How to Get Life Insurance Quotes

According to the Insurance Barometer Report, 15% of people think they can’t afford life insurance. At the same time, many consumers overestimate the cost. The only way to know what you will pay is to get life insurance quotes from a few companies. Quotes are free. An experienced life insurance agent will know what companies tend to give the best prices based on your age, health and desired coverage amount.

Expect to be asked about your age, health, tobacco use, your family health history, driving record, and any dangerous occupations or hobbies.

When you have a quote that you like, you can start a formal application. You answer more questions in detail and apply for a specific policy type, amount of coverage and policy length (if you’re buying term life insurance).

Once you’ve submitted the application, some insurers may require a life insurance medical exam. These exams can take place at your home, work or sometimes a local exam office.

The time it takes to process an application varies significantly among companies and policy type.

• Some insurers offer fast life insurance, including instant approval, to people who qualify, who are generally younger (under age 60) and without medical issues.
• Some insurers use “accelerated underwriting” to skip the medical exam and process applications in a day or a week, depending on the company.
• And some insurers use a traditional process with a medical exam and an approval process that can take over a month.

How to Choose a Beneficiary

A life insurance beneficiary is the person who can claim the death benefit after you pass away.

You can name multiple beneficiaries and decide what percentage they each will receive when you die. Additionally, you should add contingent beneficiaries who will receive the death benefit if your primary beneficiaries have died.

Not everyone names people as beneficiaries. Some people name trusts. By creating a revocable living trust and naming it as the life insurance beneficiary, you can ensure that the money is used according to your wishes. For example, the trust money could be used to take care of children.

If you decide to name a trust the beneficiary of your policy, make sure to work with an attorney to structure the trust correctly. It’s also wise to work with a financial planner so that a trust is part of your larger financial plan.

It’s crucial to update and review your beneficiary selections regularly. For example, life events such as a marriage or a divorce can impact your selection.

To update your beneficiaries, contact your life insurer and submit a change of beneficiary form. Making changes only on a will won’t affect life insurance.

How Does a Beneficiary Make a Claim?

Claims can be paid quickly—in about a week, assuming the insurer has all the documents it needs. Don’t assume a life insurance company will contact you. It’s unlikely they know that your relative died. While some insurers are proactive in monitoring for insured customers who have passed away, they won’t discover a death immediately.

• Death certificate: To start the claim process you’ll need to submit a certified copy of the death certificate. The insurer won’t send it back. Therefore, you may want to request a few certified copies if you need them for multiple purposes.
• Contact the insurance company right away: While you may have a lot on your plate after a loved one passes away, the sooner you contact the insurer, the sooner you can get the money.
• Verify you have met all claim requirements: Once all of the claim paperwork is done, make sure you have all supporting documentation attached. This can include a claim form and death certificate.

Claims are typically paid within 30 days after the insurer receives the necessary documents.

You don’t need an original copy of the life insurance policy to make a claim. You only need to know the name of the insurance company and contact them to initiate the claim.

That’s why it’s important to let your beneficiaries know that you have a policy and tell them the name of the insurer. And insurers are contractually obligated to pay only the people listed on the policy.

Life insurance beneficiaries don’t have any restrictions on how they can use a life insurance payout. Money from life insurance money can be used to: