30 Jun What is a Car Insurance Deductible?
When looking for auto insurance, you’ll almost certainly come across the term “deductible” and wonder how it affects you and your insurance prices – and when you’ll need to use it.
A car insurance deductible is an amount you’re responsible for paying when an insurance claim is granted. The rest is covered by your insurance company, up to your policy limit.
Let’s look at how a car insurance deductible works when you need to pay it (and when you don’t), as well as considerations to consider when comparing car insurance options to choose which one is best for you.
What is a Car Insurance Deductible?
Deductibles are the costs you agree to pay after an accident for repairs or replacement of your car. If your vehicle is damaged $5,000 in an accident and you have a $500 deductible, your insurance company should cover $4,500 of the claim while you are responsible for $500.
Before concluding your auto insurance coverage, you’ll discuss the amount of your insurance deductible with your insurance agent or carrier. You should be able to adjust your deductible at any time, however.
Different Types of Car Insurance Deductibles
There are numerous deductibles based on the different forms of coverage, just as there are many types of car insurance coverage. It’s critical to know how much the vehicle insurance deductible is for each type of policy so you know how much you’ll be responsible for in the event of a claim.
Here are a few examples of coverages that typically include a deductible or allow you to choose one:
There are no deductibles in liability insurance. In an accident, this sort of insurance can help cover the costs of the damages you cause to another person or their property.
When you’re at fault, this coverage compensates for the repairs to your car. Your vehicle may suffer damage if it collides with another car or if an object such as a tree or wall strikes it. This is typically the highest deductible available on automobile insurance coverage. A vehicle that is found to be at fault will have its insurance cover the damage to your car if this driver is fully insured. You wouldn’t have to pay a deductible in such a situation.
The coverage reimburses you for expenses incurred if your car is damaged by anything other than a collision. Repairing hail damage, colliding with a deer, or fixing a cracked windshield are all examples of this. It will also pay to replace items that have been stolen. Unlike auto insurance, it usually has a lower deductible.
Personal Injury Protection
Personal injury protection (PIP) is optional coverage for which you may be eligible based on your state laws. In this policy, both you and your passengers are covered for medical expenses. It can also help with expenditures such as lost wages or someone to help you with home chores after an accident since you cannot do so yourself. If you file a claim under this coverage, you may be subject to a deductible, depending on your state. Many states with PIP deductibles offer various options, and the deductible you select can affect your rate.
This form of coverage will come to your rescue if the other driver in an accident is at fault but isn’t insured or has insufficient coverage to compensate for your property damage. Deductibles are sometimes, but not usually, required for this coverage, and restrictions vary by state. This coverage isn’t offered in every state, but it may come with a state-mandated deductible in those that do. If a deductible is required, it is usually small, ranging from $100 to $300.
How Much is a Deductible for Car Insurance?
Many drivers opt for insurance with $500 comprehensive and collision deductibles, although alternative options are frequently available. Deductibles of $250, $500, $1,000, or $2,000 are commonly offered by most companies. Some auto insurance providers have multiple deductible alternatives, such as a $0 or $100 deductible. It’s also not necessary for your comprehensive and collision coverages to match. For instance, a $100 comprehensive deductible may be paired with a $500 collision deductible, or vice versa.
If you require repairs, the amount you receive will be based on the amount you set aside each month for auto insurance. The lower your deductible, the greater your insurance premium will be. When selecting a deductible, keep your total financial situation in mind.
How Many Deductibles Should You Have?
You usually get to choose the deductible amount when you buy auto insurance with a deductible. Your budget, risk tolerance, and car value determine the appropriate amount for you.
It may make sense to choose a greater deductible to save money on your premium if your budget allows for it. If not, you might benefit from a lower deductible. In general, greater deductibles are preferable for more expensive cars, whereas lower deductibles are preferable for less expensive cars.
If you believe you will rarely need to file a claim, a higher deductible may be appropriate. Whatever amount you choose, make sure you can afford to pay it if you have to file a claim after an accident.
Also Read: Auto Insurance Discounts for Veterans
When You Might Not Have to Pay Your Deductible?
There may be times when you are not required to pay your deductible, but these are uncommon. In general, you won’t have to pay your deductible if:
Another Driver is A Fault
You should not be responsible for paying a deductible on a claim filed via another driver’s insurance carrier if they are at fault for hitting you and they are covered. When you file a claim with your insurance, your deductibles only apply.
A declining deductible, sometimes known as a van
ishing deductible, is an option offered by some insurance providers. If you have this policy provision, the longer you go without an accident, the lower the amount of your deductible you will have to pay. Each year you are accident-free, you will receive a $100 credit toward your deductible.
Once you’ve used your reducing deductible, you’ll typically have to wait a certain amount of time to be eligible for it again. If you are interested in learning more about this option and what it entails, don’t hesitate to contact your insurance agent.
Your Car Insurance Deductible: The Bottom Line
A deductible is essentially a way for the driver and the insurance company to split the financial burden of an accident. Unless you are the at-fault driver, a deductible may not apply to you; however, it could not cover you if the other driver has inadequate coverage or no coverage at all.
Keep in mind that any claim you submit will require you to pay your deductible. A car insurance deductible isn’t the same as a health insurance deductible in that it’s a fixed sum you pay each year before services are covered.
Make sure you search around and get rates from several different vehicle insurance companies. Compare quotes with the same deductible and liability limits to compare apples to apples.