Deductible
Deductibles are typically used to deter the large number of claims that a consumer can be reasonably expected to bear the cost of. By restricting its coverage to events that are significant enough to incur large costs, the insurance firm expects to pay out slightly smaller amounts much less frequently, incurring much higher savings. As a result, insurance premiums are typically cheaper when they involve higher deductibles. For example, health insurance companies offer plans with high premiums and low deductibles, or plans with low premiums and high deductibles. One plan may have a premium of $1,087 a month with a $6,000 deductible, while a competitive plan may have a premium of $877 a month with a $12,700 deductible. The consumer with the $6,000 deductible will have to pay $6,000 in health care costs before the insurance plan pays anything. The consumer with the $12,700 deductible will have to pay $12,700.
Vehicle insurance in the United States
Collision coverage provides coverage for vehicles involved in collisions. Collision coverage is subject to a deductible. This coverage is designed to provide payments to repair the damaged vehicle, or payment of the cash value of the vehicle if it is not repairable or totaled. Collision coverage is optional, however if you plan on financing a car or taking a car loan, the lender will usually insist you carry collision for the finance term or until the car is paid off. Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW) is the term used by rental car companies for collision coverage.