Finance Question: Why do you think insurance companies always require a deductible?
Answers:
The reason insurance companies require a deductible is to reduce morale hazards. A hazard is something that makes a loss more likely to occur. A morale hazard occurs when the insured doesn't care if a loss occurs. If the insured shares in the first dollars of a loss through a deductible, it reduces the morale hazard - in other words, if you have a deductible, you're more careful.
So that there are not so many frivolous claims to handle, Usually the larger the deductible, the lower the premiums.
Because if the amount is under your deductible, they don't have to waste their time and money. They don't want to bother with all these small claims when you can easily pay for it yourself. It saves them trouble and money. It also saves you money, so you don't have to pay so much insurance money for no deductible.
So you will take care of little mishaps yourself without turning it over to the insurance.
It is useful for them to lower the premium
To eliminate small losses. Without a deductible, every paperclip would be covered, when it was stolen by an employee.
Also, to encourage the insured to be responsible - when they absorb a small part of the loss, they're less likely to be careless about things that could cause claims - like leaving your purse in the car, with the car unlocked. Or leaving your keys in the ignition, in the car.
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