It’s also important to note that a policyholder can change their deductible at any time. In fact, this may be a smart move depending on their personal finances and risk profile. For instance, if someone is comfortable with taking risks and has ample savings or an emergency fund, a higher deductible may make sense. On the other hand, if someone is risk-averse and seeks certainty in their financial affairs, a lower deductible may be more appropriate.
For example, let’s say that a policyholder has a $1,000 deductible for their car insurance. If the car gets damaged in an accident, the insurer will only cover up to that $1,000 worth of damage, since the claimant has already paid the deductible. This is because, according to Progressive, the deductible is the policyholder’s share of the loss.
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