Scenario: I pay X amount of dollars per month for car insurance. I have all 4 tires stolen from my vehicle overnight. I submit a claim with my insurance company to repair any damages. I now pay a **hefty** X amount of dollars for the event that has occurred.
In: Other
Deductibles put some of your skin in the game so it reduces what the insurance company pays so (in theory), it reduces your premiums.
More importantly in the real world, it prevents you from submitting tiny value claims. The overhead to the insurance company to process a claim is basically independent of the value of the claim…they do the same basic work to send a $10 paint chip touchup to the body shop as to send a complete repaint. If it literally cost you nothing to submit a claim a lot of people would submit *everything*…which drives the insurance companys’ costs way up. Deductibles prevent that. If you have a $500 deductible you’re not going to submit anything to the insurance company for values under $500…you handle the small/easy stuff yourself so they don’t have to.
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