If you’ve ever shopped for insurance in Minnesota — home, auto, health, or otherwise — you’ve encountered the word “deductible.” It’s one of the most fundamental concepts in insurance, yet it’s also one of the most misunderstood.
Get this one concept right, and you’ll be far better equipped to choose the right coverage and avoid unpleasant surprises when you actually need to file a claim.
The Simple Definition
A deductible is the amount you pay out of pocket before your insurance company starts paying on a claim.
Think of it like this: your insurance policy is a safety net, but you’re responsible for the first portion of any loss. That portion is your deductible. After you’ve covered the deductible, your insurance kicks in and covers the rest — up to your policy limits.
A Simple Example
Let’s say you have a homeowners insurance policy with a $1,000 deductible, and a storm causes $8,000 of damage to your roof.
Your deductible: $1,000
Your insurance pays: $7,000
Your out-of-pocket cost: $1,000
Now imagine a smaller claim — say, $600 in damage. Because the damage is less than your deductible, your insurance wouldn’t pay anything. You’d cover the full $600 yourself. This is one reason it’s not always a good idea to file a claim for every minor incident.
How Deductibles Work Across Different Insurance Types
Deductibles function slightly differently depending on the type of insurance:
Auto Insurance
Auto policies typically have separate deductibles for collision coverage (when you’re in an accident) and comprehensive coverage (theft, weather, hitting a deer, etc.). These deductibles apply per claim — meaning each time you file, you pay the deductible amount.
Example: $500 collision deductible. You back into a pole and cause $2,200 in damage. You pay $500; your insurer pays $1,700.
Homeowners Insurance
Like auto, homeowners deductibles apply per claim. Most policies have a standard dollar-amount deductible, though some — particularly in high-risk areas — use percentage-based deductibles for specific perils like wind or hail.
Percentage deductibles are based on your home’s insured value. A 2% deductible on a $300,000 home means $6,000 out of pocket before insurance pays. It’s important to understand which type your policy uses.
Umbrella Insurance
Umbrella policies often have what’s called a “self-insured retention” rather than a traditional deductible, but the concept is similar — there’s a threshold you absorb before the umbrella coverage activates.
Life Insurance
Life insurance policies do not have deductibles. When a claim is paid, the full benefit goes to the beneficiary.
Commercial / Business Insurance
Business policies follow a similar structure to homeowners and auto — deductibles apply per claim, and the amount can vary significantly depending on the type of coverage and the risk involved.
The Deductible-Premium Relationship
Here’s one of the most important things to understand about deductibles: they have a direct inverse relationship with your premium.
Higher deductible = lower monthly/annual premium
Lower deductible = higher monthly/annual premium
Why? Because when you accept a higher deductible, you’re agreeing to absorb more of the financial risk yourself. The insurance company is taking on less risk, so they charge you less.
This creates a real choice every policyholder has to make:
Lower Deductible: You pay more each month, but face less out-of-pocket cost if something happens. Better if you don’t have much in savings.
Higher Deductible: You pay less each month, but need to be able to cover a larger amount if something happens. Better if you have an emergency fund.
How to Choose the Right Deductible
There’s no one-size-fits-all answer, but here are the key questions to ask yourself:
1. What Can You Afford to Pay Out of Pocket?
Your deductible should be an amount you could realistically cover without financial hardship. If you choose a $2,500 deductible to save on your premium, but you don’t have $2,500 available in an emergency, that’s a problem.
2. How Often Do You Expect to File Claims?
If you’re a careful driver with a clean record and a newer car in a safe area, a higher deductible might make sense — you’re less likely to need it. If you live in an area prone to severe weather or have a long daily commute with high accident risk, a lower deductible might be worth the higher premium.
3. Does the Math Work?
Compare the premium savings of a higher deductible against how much more you’d pay out of pocket in a claim. For example, if raising your deductible from $500 to $1,000 saves you $200/year on your premium, you’d need 2.5 claim-free years just to break even. That analysis helps you decide.
Common Deductible Mistakes to Avoid
Choosing a deductible you can’t actually afford: The savings feel great until you need to file a claim and can’t cover your portion.
Forgetting that deductibles apply per claim: If you have two separate incidents in one year, you pay the deductible twice.
Confusing percentage and dollar deductibles: Always confirm which type applies to your policy, especially for homeowners coverage.
Filing small claims just because you’re covered: Filing a $700 claim with a $500 deductible might not be worth it — you only get $200, and your premium could increase at renewal.
Should You File a Claim or Pay Out of Pocket?
This is a question worth asking every time something happens. A general rule of thumb: if the cost of the damage is only slightly above your deductible, it may be better to pay out of pocket. Filing a claim — especially multiple claims in a short period — can lead to premium increases or even policy non-renewal.
A good agent can help you think through whether filing makes sense in a given situation.
The Bottom Line
Your deductible is the foundation of how your insurance policy actually works in practice. Getting it right — choosing an amount you can afford that balances your premium cost — is one of the most important decisions you make when purchasing a policy.
When in doubt, talk it through with your insurance agent. That’s exactly what we’re here for.
Have questions about your deductibles? Whether you’re reviewing an existing policy or shopping for new coverage, our independent agents can walk you through your options and help you find the right balance of coverage and cost. Contact us today for a free review.
Rosemount, MN, October 2024 — Sentinel Assurance Group has been named a 2024 Nextdoor Neighborhood Fave business, the annual awards program that recognizes local businesses loved by neighbors. Neighborhood Fave winners like Sentinel Assurance Group will receive greater visibility and ranking on the Nextdoor app, a Neighborhood Fave badge on their Nextdoor Business Page, and a “2024 Neighborhood Faves Winner” sticker to showcase their win in the real world.
“This year’s Neighborhood Fave businesses represent the outstanding service providers, local spots and eateries that are an essential part of our everyday lives,” said Nirav Tolia, Chief Executive Officer of Nextdoor. “We’re thrilled to celebrate these important members of the community, but more importantly, being a Neighborhood Fave is good for business. Congratulations to all of this year’s winners.”
Selected by volume of neighbor ‘Faves’ and recommendations on the platform from the past year, the Neighborhood Faves awards recognizes the most beloved local businesses on Nextdoor. Used by one in three households in the US, Nextdoor is the essential neighborhood network where neighbors, public agencies, and businesses connect around local information that matters. In a May 2023 Nextdoor survey, 94% of Nextdoor neighbors report valuing recommendations for products, services, and businesses from their Nextdoor neighbors and Neighborhood Faves winners receive six times more recommendations on their respective Business Pages.
The complete list of winning businesses is available at nextdoor.com/favorites. Join the neighborhood network by downloading the Nextdoor app in your favorite app store or visiting nextdoor.com.
Motorcyclists know that riding gives them a freedom that driving a car just can’t match. But the best riders also know that motorcycles require more focus to operate and don’t provide the same protections cars do in the event of a crash. The best riders also take great care in all situations, whether they’re in heavy traffic on I-94, stuck in the rain or just taking a quick ride on a perfect day.
If your habits aren’t as safe as they could be, or if you’re new to motorcycling, don’t worry! Instead, take time to improve. The quick safety tips below are a great place to start.
Want more? Check out the Motorcycle Safety Foundation (http://www.msf-usa.org) or the American Motorcyclist Association (www.americanmotorcyclist.com). And remember to give us at a call at 651.237.5180 when you need to get coverage for your bike (or your home or auto, boat or more)!
First things first
Wear proper safety gear and, most importantly, a helmet – no matter how short your trip may be.
Make sure you can be seen by other motorists. Make it easier for them by wearing reflective clothing, always using turn signals (and perhaps hand signals as well) and keeping your headlight on.
Even when taking the above precautions, stay alert and assume that other drivers don’t see you — especially at intersections and when making lane changes or passing.
Be patient. Don’t tailgate, and if someone is tailgating you, get out of their way.
Don’t ride after drinking or taking any medications that could impair your abilities.
Riding at night
Again, make sure you’re visible — particularly at dusk. Consider upgrading your headlight or adding other lights to your ride. Is your bike black? What about your clothing? Both will make you more difficult to see at night.
Your vision needs to be clear, so keep your visor or goggles clean and free from scratches. If you don’t use face or eye protection, consider it.
Carry a flashlight or other emergency gear with you so a mechanical problem doesn’t leave you stranded — and invisible — on the side of a dark road.
Bad weather?
Keep rain and cold-weather gear handy. Riding isn’t just more enjoyable when you’re warm and dry — it’s safer, too.
Use extreme caution when it first begins to rain, as the roads are most slick at that point. Pull over and wait if necessary. It’s better to be late than ride in unsafe conditions.
We wish that all of your rides could be on sunny days with wide-open roads, but we know that’s not going to happen. So think about safety every time you start up your bike!
Unique among motor sports, driving all-terrain vehicles in Minnesota combines an exhilarating workout with a test of maneuvering skills and a hearty dose of adrenaline. Fun as it is though, it can be a risky activity. So, take a systematic approach to keeping things safe before, during and after your outings.
Before You Go
Take a Course Formal hands-on training courses cover how to control ATVs in commonplace situations. The ATV Safety Institute typically offers its ATV RiderCourse free to anyone who buys a new qualifying machine from an institute member. Call 1-800-887-2887 or visit atvsafety.org for class information.
Dress for Success A motorcycle or other motorized sports helmet, certified by the U.S. Department of Transportation, is a must. You’ll also want to suit up with over-the-ankle boots and long pants, a long-sleeved shirt, goggles and gloves.
Remember Insurance Riding on state-owned land? Many states require ATV insurance, which offers coverage options similar to what’s available for motorcycles – liability, comprehensive, collision, safety apparel replacement, roadside assistance and more. Check out our Specialty Insurance page for more information these coverages!
During the Ride
Don’t Share the Seat You’ll want to be free to shift your weight according to the terrain and the situation. Passengers make it difficult – and dangerous.
Stay Off the Road ATVs simply aren’t street-legal machines, at least not in most states. The solid rear axle with no differential means they can be hard to handle on pavement.
Let Kids Be Kids Children should never be allowed to drive or ride on an adult ATV. Someone under 16 on an adult ATV is twice as likely to sustain an injury as a child riding a youth ATV, according to ATVSafety.gov.
After the Outing
Wait to Celebrate This is when you get to unwind with a cold one, not before. You need sharp reaction time and judgment, so don’t ever drive ATVs under the influence of alcohol or drugs.
We here at Sentinel Assurance Group want you to enjoy your ATV outings this summer, while staying safe. Just give us a ring if we can help you explore ATV insurance options!
It’s summertime – prime RV season in Minnesota. But, even if you know where you want to go, do you know how to get there?
After all, driving an RV is a little different than simply hopping in your car, so we here at Sentinel Assurance Group put together some tips to help you plan your route and enjoy your trip.
Use an online trip planner: Two that we know of are FreeTrip.com and the Good Sam Club (this one requires a membership). You can set guidelines, such as avoiding highways or low clearances, and get a route customized to you.
Don’t forget guidebooks and atlases: There’s nothing wrong with going low-tech, too. In fact, it’s good to have a backup for when you need to change plans without Internet or GPS assistance. Atlases for commercial truck drivers, in particular, can be useful, because they highlight some of the same things you need to consider, such as overpass height, etc.
Know your vehicle: It’s tempting to just take the height specifications from your manual, but it’s better to know for sure. Measure your RV from the ground to the highest item on the roof. Stick it on a label inside your windshield so it’s always visible.
Utilize other tools: Some GPS models have RV/truck modes that will adjust routes based on the larger size of your vehicle. Use them if they’re available.
Have multiple sources of information: Online trip planners and GPS systems make things easy, but they’re not always up to date. So, in addition to your trip plan and guidebooks, also take care to pay attention to signs and your surroundings when you’re on the go.
It’s easier than ever to plan for a great road trip, so get out there and explore! We’ll be waiting to hear all about your trip and to help you with all of your RV insurance needs.
Getting married is a big step that you’re no doubt commemorating with a big celebration. And, that often comes with a (fairly) big price tag. So, have you considered insuring the whole to-do?
As with other sizeable investments, you can insure big events, such as your wedding. But, that’s not the only way insurance can play a role in your big day and the events that follow. Here are four tips for insuring your wedding, rings and more:
Big day, big investment – protect it
Of course you want your big day to go off without a hitch. But, you also want to prepare for those pesky “what ifs.” What if the caterer backs out? What if the bride’s dress gets lost in her checked baggage? What if your venue goes out of business?
Event insurance typically covers unexpected issues with the site, weather, vendors and illness or injury, so you aren’t stuck with the tab. For example, if you need to find a new caterer the day before the wedding, your policy may help with the costs.
Say ‘I do’ to covering your rings.
Regardless of the monetary value of your engagement and wedding rings, it’s important to protect your investment — preferably right after you purchase them. We can help. Call us from the jewelry store if you like, and we’ll schedule your new bling on your renters insurance, condo insurance or homeowners insurance.
Cover your bases by covering your gifts.
While you’re dancing the night away, you don’t want someone walking away with your gifts. But, unfortunately, it happens. You may want to consider a policy to protect your gifts. And, of course, you’ll want to include them as part of your home inventory and personal property coverage. Some items, such as collectibles and china, may need scheduled coverage, just like your rings.
Start your honeymoon right.
If your honeymoon costs as much as a car, it may make sense to get travel insurance. Policies can include coverage for trip cancellation or delay, and even medical insurance. Frommers.com says it should cost no more than 8 percent of your trip price. Whether your wedding is a small family affair or the biggest event of the year, you deserve to have a stress-free day. Let us help you select the insurance coverage you want for your wedding and everything that goes along with it. So, when the big day arrives, all you have to worry about is having a great time!
