When you purchase an Auto Insurance policy, it typically does not come with a deductible if you only purchase the state minimum Liability Insurance. However, most drivers choose to carry additional coverages, like Comprehensive and Collision coverage. Each of these coverages, as well as some other add-on coverages, often have their own deductibles.
What is a Deductible?
A deductible is the amount of money that you must pay before your insurance company pays for a claim. You most likely have a few options when it comes to choosing your deductible. Common deductibles range from $500-$1,000. However, keep in mind that when you choose your deductible amount, it can affect your Car Insurance rate.
Are High or Low Deductibles Better?
The answer truly depends on your own financial situation. Generally speaking, the higher your deductible, the lower your policy premium. The opposite is also true because when your deductible is low, your premium usually increases. This is because carrying a high deductible requires you to pay more out-of-pocket in case of a claim. Therefore, you should carefully consider your options between premium costs and your deductible. If you get into an accident or need to make a claim, will you be able to pay your deductible first?
Why Do Car Insurance Policies Have Deductibles?
As mentioned above, having a deductible means you pay money out of your own wallet before the insurance company has to step in. But that’s not the only reason insurance policies have deductibles. The main reason is that by having a deductible in place, insurance companies can greatly reduce the number of “small claims†that would eventually lead to higher rates for everyone.
For example, let’s say you carry Collision coverage on your Auto Insurance policy. You get home late one night and accidentally back into a utility pole. There are no injuries and the pole is undamaged. However, the fender on your car now has a dent. So, who pays for the repair?
Scenario A) If the cost to repair the fender does not exceed the deductible for your Collision coverage, then you are responsible for paying for the repairs. Let’s say your deductible is $500 and it only costs $350 to repair the dent in your fender. That means you must pay that amount for the repair.
Scenario B) However, if the cost to repair your fender is $600, then you must pay the $500 and your insurance company will pay the leftover $100. This is true only if your insurance company approves the claim.
Speak with an Insurance Specialist
Do you still have questions about Car Insurance deductibles? Speak with an Insurance Specialist at (855) 919-4247. They can explain how add-on coverages and deductibles work with your policy. They can also provide you with a free quote in minutes. Make sure you understand your coverage before you need it and call AIS today.
This content is offered for educational purposes only and does not represent contractual agreements. The definitions, terms and coverages in a given policy may be different than those suggested here. Such policy will be governed by the language contained therein. No warranty or appropriateness for a specific purpose is expressed or implied.
