The following is my answer to a Quora
question: “What
are the benefits of insurance? How do
insurance deductibles work?”
Insurance mitigates against the cost of
loss. It is a means to protect wealth, to create an immediate estate upon
death, or even as a means to wealth acquisition and growth, when used as
financial instrument. It is not about
merely buying a policy, but how you structure it within your existing portfolio
of investments, and how you use it.
A deductible is a prearranged amount,
above which, the policy pays out in the event of a claim. This may be a specific number, or a
percentage, depending on the policy. For
example, if your deductible is $500, and you make a claim of $1,000, the policy
pays out only $500.
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