What is the impact of having a higher deductible on an insurance policy?

Having a higher deductible on an insurance policy typically results in lower premium costs. This is because when an insured agrees to pay a larger portion of any claim before the insurance coverage kicks in, the insurer perceives less risk. As a result, the overall likelihood of the insurer having to pay out on claims decreases, which in turn allows them to offer lower premiums. Insured parties often choose higher deductibles as a way to reduce their regular expenses, knowing they will be responsible for the initial portion of any loss.

In contrast, factors such as claims approval likelihood, policy terms, and coverage limits are generally not directly influenced by the deductible amount. A higher deductible does not inherently change the likelihood of a claim being approved, nor does it affect the fundamental terms of the policy itself. Similarly, it does not increase coverage limits, which are predetermined by the policy conditions. Thus, the relationship between a higher deductible and lower premium costs is a key principle in insurance pricing.