Understanding deductibles can be tricky business if you’re trying to familiarize yourself with car insurance. Let’s break down the key things to know about deductibles to help you pick the most complete and affordable car insurance for you!
What does “deductible” mean?
A deductible is a set amount of money, determined in your car insurance policy, that you will have to pay in the event of a claim before your insurance will take care of additional costs. Deductibles are typically associated with the physical damage coverages under your policy (comprehensive and collision) but may also apply to other coverages like Medical Payments or Personal Injury Protection. As deductible relates to physical damage coverage, once it is determined how much money it will take to fix your car, you’ll pay the deductible, and your insurance will pay whatever is left over. Deductibles typically range anywhere from $100 to $1,500. Also, the amount of damage over your deductible will typically be covered up to the actual cash value (“ACV”) of your car.
What’s an example of a deductible?
Let’s say you get rear-ended by another car. You file a claim, and the damage to fix your bumper comes out to $700. If you have a deductible of $200, that’s how much you would pay for repairs, while your car insurance would pay for the remaining $500.
How does a deductible relate to a premium?
Generally, the higher the amount of your deductible, the lower your premium will be. The tradeoff, of course, is that you’d have to pay more money out-of-pocket in the event of an accident, but in the meantime you’ll be paying less for your premium. (This is why being a safe driver isn’t just smart; it’s economical too!)
What deductible amount should I choose?
Again, it depends on what you want to pay for your premium vs. your deductible. Consider the amount of cash you might have on hand in the event of an accident, whether that would mean a minor fender-bender, a damaged hood, or even a totaled car. How much would you be able to pay while keeping your other expenses in check? If you think there’s enough cushion in your bank account to deal with that kind of unexpected expense, a higher deductible and a lower premium might be worth it for you.