What Is a Deductible In Car Insurance?

Here’s a comprehensive explanation of what a deductible is in car insurance:

Contents

What is a Deductible?

Your Share of the Repair Cost: A deductible is the amount of money you agree to pay out-of-pocket when you file an insurance claim for damages to your car. Your insurance company covers the remaining costs, up to your policy limits.

Example:

You Choose Your Deductible: When selecting your car insurance policy, you typically decide on your deductible amount.
An Accident Occurs: If you get into an accident and need to file a claim, your insurance company determines if the damage is covered by your policy.
You Pay Your Deductible: If the claim is approved, you first pay your deductible directly to the repair shop or the party who fixed your car.
Insurance Covers the Rest: Your insurance company handles the remaining repair costs (up to your policy limits).

Higher Deductible = Lower Premium: Generally, choosing a higher deductible will lower your monthly insurance premiums (the cost of your policy).
Lower Deductible = Higher Premium: Opting for a lower deductible will likely result in higher monthly insurance premiums.
Deductibles Apply Per Claim: You pay your deductible each time you file a claim, not just once per year.

Discourage Small Claims: Deductibles deter people from filing claims for every minor repair, keeping costs down for the insurance company.
Shared Responsibility: They create a sense of shared responsibility between the insurance company and the insured, promoting cautious driving.

Consider these factors when picking your deductible:

Your Financial Situation: Can you comfortably afford to pay a higher deductible in the event of an accident?
Your Driving Record: If you’re a safe driver with low accident risk, a higher deductible could save you money on premiums.
Value of Your Car: If your car is older, having a high deductible might not make sense as the potential repair costs might not outweigh the premiums you save.

5/5 - (1 vote)