First Dollar Coverage

If we have an insurance policy that charges us no deductible when we claim a loss, and also covers the entire value of that loss, then we have what’s known as first dollar coverage. Why is it called that? Because the first dollar spent dealing with an insurance claim is spent by the insurer, and not us.

“But wait,” one might be saying. “If there’s no deductible and the insurance company covers the whole claim, then what’s the drawback? Why wouldn’t everyone have first dollar coverage for everything?” See: Deductible. (It's the amount that the insured pays first, before insurance dough coverage kicks in.)

Well, those are great questions. First, these types of policies are kind of rare. They show up mostly in health insurance policies, though we can also find them in home and auto policies. They’re rare, because they’re not always a good deal financially for the insurance company, and sometimes those companies decide the risk is just too high.

Second, first dollar coverage policies tend to be more expensive. Sure, we might not have a deductible in case of loss, but we’re probably paying higher premiums than we would for another type of policy. As with buying any type of insurance, it’s a good idea to do some research before signing up.