Why are deductibles a necessary element in Insurance policy?

Deductibles in practice is mostly - inversely proportional to premiums- like high deductibles has lower premiums- this is one kind of understanding.

In other way deductibles thus reduce the thought of getting service for granted- so a small deductible keeps a check and be cautious to when using the health card.

The rational behind insurance policy deductible may be several reasons as here under :-

1/To minimize management expenses for both insurance company and the insured by avoiding processing of small claims which in accordance to policy condition to be bear by the insured.

2/Make the insured aware about the risk safety and be careful about his interest insured and behave in a manner that as if he has no insurance policy , as he will participate in the claim payment according to policy excess or deductible condition.

3/ Therefor the deductible in insurance policy save time and expenses for the insurance company and the insured .

Best wishes 

Commercial insurance policies are as varied as they are numerous. One thing they all generally have in common is coverage exclusions and high hurricane deductibles. New Paradigm Underwriters, LLC is offering a new insurance product called Hurricane PM. Hurricane PM is part deductible buyback policy part gap coverage that gets the insured paid from dollar one. The coverage is triggered by “a named storm exceeding a pre-determined wind speed.” In other words, where traditional wind insurance policies would have a named storm or hurricane deductible kick in, the Hurricane PM coverage activates to cover the out of pocket loss that might ordinarily be the insured’s to deal with.

In an insurance policy, the deductible is the amount of expenses that must be paid out of pocket before an insurer will pay any expenses. In general usage, the term deductible may be used to describe one of several types of clauses that are used by insurance companies as a threshold for policy payments.

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.

Deductibles help to eliminate fraud in insurance claims, and it also a part of risk retention for insurance companies. 

• Les franchises ont différents rôles. Suivant les cas, elles permettent à l'assureur de supprimer les petits sinistres qui coûtent plus cher en frais de gestion qu'en indemnisation, de diminuer l'aléa moral, l'assuré continuant à subir une perte en cas de sinistres, de diminuer son risque de ruine, en se protégeant contre un sinistre exceptionnel. Lors de la souscription d'un contrat, elle permet d'obliger l'assuré à dévoiler des informations sur son risque. Le choix d'un assuré entre un contrat sans franchise ou avec franchise dépend en effet de son estimation de sa probabilité de subir un sinistre. Ce rôle est critiqué car le choix de la franchise par l'assuré dépend aussi de sa situation financière et de son aversion aux risques. Pour l'assuré, les franchises permettent une diminution de la prime, en contrepartie d'une diminution des garanties.