You must help clients select commercial auto insurance that will protect them and the business. Among the policy options that the buyer might need to choose is their deductible limit. They might look to you to make recommendations on the deductible. How can you do so effectively?
Multiple sections of commercial auto policies might come with deductibles. That will ultimately impact a customer's financial responsibility for their insurance claims. Don't hesitate to advise them on the pros and cons of selecting a certain deductible value.
Deductibles In Brief
A deductible is a client's financial responsibility for an insurance claim. So, if someone has a $500 deductible, they must pay this amount before the policy covers the rest of a claim. If a claim cost falls below the value of the deductible, then insurance likely won't pay.
Here are a few scenarios involving a $500 deductible.
- A car sustains $2,000 in damage. The client will pay the first $500 (the deductible) for repairs. The insurer will then pay the remaining $1,500, as $2,000 - $500 = $1,500.
- A car sustains damage valued at $450. The policy likely won't pay because this is lower than the deductible cost. Keep in mind, however, that some damage does not come with a deductible.
- Even if a vehicle sustains $501 dollars in damage, the client might still have to pay the $500 deductible. Insurance might still pay the remaining $1. However, in cases like these, claim often prove arbitrary.
The Importance Of Deductibles To Clients
Deductibles can impact a client's finances. Clients must keep them in mind when buying coverage.
- Deductibles will signal to a client how much they must pay out in case of a policy claim. That could impact a business' bottom line.
- Deductibles can also impact a client's overall policy costs. Most insurers drop premiums for clients who carry higher deductibles.
How Can You Help Set Deductibles
Ultimately, you can provide feedback to your clients on their deductible options. While a higher deductible might cut premiums, it could put clients in a bind down the road. For example, if the client risks losing significant funds in a covered incident by paying a high deductible, then the overall benefit of the higher number might not prove fruitful. Make sure the client understands this factor. Recommend they carefully consider how much they want to pay for a claim.
Most policies allow customers to choose from several deductible options. Therefore, discuss with your clients the different cost benefits of each option.