An insurance deductible is part of life, whether it’s for your home, car or healthcare. For most people, the amount of this deductible has increased over the years, putting a greater burden on the person to manage the cost of life’s disasters in whatever form they take. The question becomes, what do you do when you can’t afford to pay the deductible? The answer varies slightly depending on the type of insurance but the bottom line is that you need to come up with the cash.
A deductible is an out-of-pocket payment you must make before the insurance company pays its portion of the bill. The process is slightly different for healthcare, which often covers most or all preventative care prior to meeting the deductible, but the cost of other services must be paid by the patient up to the amount of the deductible before insurance payments begin. Many people choose high deductibles for car, health and homeowners insurance because it reduces the premium costs, but when there is a problem making this deductible, payment can be difficult.
Regardless of the category of insurance we are discussing, you can always pay the deductible with a credit card. If you want to avoid debt or don’t have the credit limit needed to pay the deductible, you can sell unwanted or needed items to raise the necessary cash. Unfortunately, these options are unpleasant at best but there are other ways to address this issue.
If your car has been damaged in an accident, the first thing to ask is whether or not you need to make the repair immediately. A dented fender or dinged door doesn’t impact the save drivability of your car. In this situation, you can wait until you meet the deductible before paying to repair your car. Some insurance companies will pay the repair shop based on the estimated cost of the repairs, minus the deductible. In this case, you may be able to negotiate a payment plan with the pair shop or at least determine how long you have to schedule the repair before the insurance refuses to pay.
If the car isn’t drivable, you can ask the mechanic to allow you to make payments toward the deductible, but they can legally keep your vehicle until this debt is cleared. If the needed repairs are extensive, you can ask the repair shop to waive your deductible. This isn’t illegal, but it is illegal for the shop to bill the insurance company more than their percentage of the bill to make up for the lack of deductible payment. These options aren’t feasible if your insurance company requires that you pay the deductible prior to them issuing a check for the remaining amount due. In any situation where you have to pay your car insurance deductible up front, you will need to dip into savings, ask family for help or take out a payday loan. These loans are truly the last resort option because they have very high interest rates.
With regard to healthcare deductibles, always ask if it’s possible to negotiate a payment plan. The healthcare provider cannot legally waive the deductible but they can allow you to pay it over time. The challenge comes in when a procedure involves multiple providers, such as with surgery. In this situation, you will need to negotiate payment plans with each provider and sometimes you might not understand that there is more than one entity that will send you a bill. The good news is that you only need to meet your deductible once rather than with each provider, but you still need to make payments to all of them to avoid having the debt sent to a collection agency.
Whenever you are faced with this situation you should explore less expensive providers such as free clinics or community health centers. These providers often request payment based on ability to pay, which may allow you to have blood work or other tests done for a lower out-of-pocket cost.
If you need to pay now for a desperately needed procedure, you may want to take an early distribution of your retirement accounts to receive the treatment you need. There are ways to withdraw funds without an early distribution penalty but you need to discuss this option with your financial advisor. Another option is to seek help from a charity to pay for your treatment. Many larger employers have funds set aside to address this exact need.
When a flood, hurricane, tornado or fire damages or destroys your home, your homeowner’s insurance may not cover as much as you think, plus you need to pay the deductible. There are a few options to help raise the needed deductible funds in a hurry. First, you can take out an equity line of credit on your home. This isn’t always possible but it is a good place to start. Second, you could take an early contribution payment from your Roth IRA, but this can damage our long term retirement plans because you can’t put the money back.
If you live in a federally declared disaster area, you may qualify for some assistance from the Federal Emergency Management Agency or qualify for a Small Business Administration loan. The SBA loans are not limited to businesses and homeowners can borrow up to $200,000 to replace or repair the damaged property and can borrow up to $40,000 to cover personal property, furniture, carpeting and other items damaged by the disaster. The interest rate is typically lower than those available through traditional means and the terms can be up to 30 years.
Of course, the best option is to start with an affordable insurance plan with a deductible you can pay. At Alliance, we work with individuals, families, and businesses to help them get the coverages they need that fit their budgets. Contact us today to learn how we can help.
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