What Is A Car Insurance Deductible?

By Sharon Gibson Posted in Car Insurance News

How Deductibles Work

When you apply for car insurance, your rate is decided by a number of factors. One of them is the deductible you choose. Most insurance companies offer deductibles ranging from $0 to $500.

You receive money following a car accident or some other event that causes damage to your vehicle. The amount you or your repair shop receives is calculated by an insurance adjuster who looks at the damage and then gives you an estimate on what it would cost to repair the car. Your deductible is the amount you’ve agreed to “chip in.”

For example, say you are in an accident that causes $1,000 in damage to the front bumper. Your policy has a $250 deductible. The amount your auto repair shop would receive is $750 and you have to provide them with the additional $250 payment.

Most insurance companies insist on sending the payment directly to the garage that will be handling your repairs. If you have the option, however, it often pays to get the check yourself. Many times, the insurance check is issued using a high estimate. If you find a garage that can do the work for less money, you can use that balance to cover your deductible and end up not having to pay out any money from your own savings account.

Deductibles Affect Car Insurance Rates

Choosing a higher deductible decreases your auto insurance premiums. Because you are paying out more after an accident, the company rewards you with lower insurance rates.

If you have a $0 deductible, you’ll pay the higher rates but you will not have to shell out any money after making a claim.

Deductibles Occur Each And Every Time

Most insurance companies stick to $100, $200 or $500 deductibles. The deductibles are found on liability and collision insurance coverage. It’s important to note that the insurance deductibles occur with every accident. If you have five accidents in one year, providing your insurance company even agrees to keep offering you insurance, you’ll pay that deductible each and every time. Unlike health insurance that usually caps how much money you have to pay out of pocket every year, auto insurance never offers the maximum out-of-pocket allowance.

Choosing Your Deductible

When you select a deductible, consider the chance you’ll be involved in an accident that is your fault. If someone else hits you, his or her insurance will pay, not yours. If you have a history of never being in accidents and your savings account has enough money to cover the deductible, a $500 deductible may be sufficient.

If you have a history of accidents, it’s usually best to set a deductible that you can pay out from your savings a couple times a year. No one wants to be in an accident, but for peace of mind it’s best to know you have coverage you can afford.

Related posts:

  1. How Do I Calculate The Best Car Insurance Deductible For Me?
  2. How Do I Evaluate Multiple Zero Deductible Car Or Auto Insurance Quotes?
  3. What Is Car Insurance?
  4. If I Report An Accident, How Much Will My Car Insurance Rate Go Up?
  5. Determining Cheap Full Coverage Car Insurance At The Best Savings

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