What is the effect of having a higher deductible on an insurance policy?

Having a higher deductible on an insurance policy means that the insured must take on a larger portion of any losses incurred before the insurance coverage kicks in. This means that in the event of a claim, the insured is responsible for paying the deductible amount out of pocket. As a result, the insured is absorbing more risk, which can lead to lower insurance premiums since the insurance company has reduced liability.

This concept is foundational in insurance principles, as the deductible serves as a means to prevent minor claims, encouraging policyholders to manage small losses themselves. It underscores the principle of risk-sharing between the insurer and the insured, where a higher deductible aligns with accepting more personal financial responsibility in exchange for potentially reduced premium costs.

In contrast, the other options do not accurately reflect the impact of a higher deductible. For instance, higher premium rates would typically be associated with lower deductibles since the insurer is taking on more risk. The statement regarding increasing coverage amounts is misleading, as the deductible influences the insured's out-of-pocket expenses rather than altering the scope of coverage itself. Lastly, the claims process may not necessarily be expedited with a higher deductible; the complexity and duration of the process typically depend more on the specifics of the claim rather than the deductible amount.