Yes, there is such a thing as Zero Deductible insurance. And you’re probably reading this because you’ve recently been disappointed (or enraged) by the large sum you had to pay, thinking your insurance was supposed to cover it. Yes, the unicorn zero deductible exists, but it’s not exactly how we imagine it to be, nor how we want it to work. A deductible is a major part of any insurance contract, whether it’s homeowners, car, business or health insurance. There’s no way around the deductible. You either pay a high deductible or a low deductible. In some circumstances and policies, there is such a thing as a zero deductible . . . but it comes with a price, and it’s useful and beneficial for particular cases, but costly in other cases. Your job is to figure out your sweet spot.
Understand Your Insurance Plan
Time and again, we see how new insurance buyers complain about their policies. It turns out they are unclear about the details around deductibles, premiums, coinsurance, and copays. Unfortunately, insurance customers don’t get involved enough with their policies until it’s too late.
There’s nothing more frustrating than having a minor medical emergency, then seeing your bill a few days later that says you owe $400 for a 10-minute visit with the Physician’s Assistant at the Urgent Care facility. This is the same frustration you get when experiencing a little fender bender, and the cost to repair your car is lower than the deductible you have to pay before your insurance kicks in to cover you repair.
If you’re not careful or tuned with your insurance coverage, the expense you incur from a doctor’s visit, car repair, or home disaster can catch you off guard, and potentially leave you in credit card debt. After going through the frustrations of realizing your up-front, out-of-pocket expense, you end up questioning whether or not you made the right decision on your insurance.
What a Zero Deductible Insurance Policy Means
A deductible is the amount you have to pay in that year before your insurance company covers the costs stated in your plan. A zero deductible plan means that you don’t have to pay for any costs upfront before receiving your benefits; your insurance company will cover your allowable claims right away. However, this only means you pay a higher monthly premium.
A zero deductible can mean different things for different types of insurances. For homeowners insurance, having a high deductible can mean annual savings since your monthly premium will be lower. You only pay a deductible each time you make a claim. According to an insurance.com analysis, the average homeowner makes a claim only once every 10 years, so with this in mind, lowering your deductible to $500 from $2,500 can save an average of $260 per year. That may not seem much, but you can see how deductibles play into your insurance plan, and how you’ll need to consider all your risks and factors. Do the math.
For health insurance, a zero deductible could make the world of difference especially if you are a big family with kids, have a chronic condition, know you will undergo medical treatment, or require ongoing medication. A high deductible plan would require you to pay out-of-pocket costs before your insurance kicks it. Consider the high cost of refilling medication each month, x-rays, and other services related to your health needs. If you don’t have a large cash reserve (or a hefty credit line) a zero deductible plan, in which you pay a higher premium each month could prove to be more “doable” than paying large one-time sum expenses.
A zero deductible plan for car insurance also has a different maze of factors to consider. Although you can’t control the unforeseen freak accident, you can control your driving habits and avoid accidents. It is typically advisable to increase your collision damage deductible and pay a lower premium, if you are a safe driver. The amount of annual savings you get from increasing your deductible for car insurance is often not enough of a savings to get a high deductible plan. And it makes a difference if you’re 50 versus 20 years of age.
Is a Zero Deductible Plan Right for You?
There are many factors to consider when choosing the right deductible and it’s important that you discuss all your options with a licensed insurance advisor. Do not haphazardly commit to an insurance plan, simply based on price alone. Choose an independent insurance advisor so they can shop for the best company on your behalf.
About Ryan Ruffcorn
Ryan grew up in Keokuk, graduated from Keokuk Senior High, and started his agency in Keokuk from scratch in 2003 after having worked for one of the largest international accounting firms, KPMG, LLP.
Ryan is hardworking; his loyal and trustworthy character is exemplified by the way he does business. He thoroughly enjoys helping clients through the insurance buying process to secure coverage for their most valuable assets.