Whenever you are purchasing car insurance you might come across the term deductible but what does it actually mean? Well understanding car insurance deductible is really important as it directly impacts how much you will need to pay out of pocket in the event of any accident. Whether you are just a first time car insurance buyer or looking forward to brush up on the details in this guide you can learn everything you need to know about car insurance deductibles.
What does deductible mean in car insurance?
A directive will in car insurance is the amount that you agree to pay out of pocket when you file a claim before your insurance company covers the rest of the expenses.
In simple terms you can say it’s your contribution towards the cost of damage or loss and it helps you lower the risk for your insurance provider holster for example if you have a car insurance policy with $500 deductible.
If your car is damaged in an accident with the repair costs amounting to $2000 you will need to pay the 1st $500 and your insurer will cover the remaining $1500.
The deductible amount can vary depending on the policy and the type of coverage that you have. It’s really important for you to know that deductible is not paid every time you make a claim only when you file a claim for repairs or damage.
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Low deductible vs high deductible car insurance
One of the most common questions that you would have is whether to choose a low deductible or a high deductible for your car insurance. Each one has its own advantages and disadvantages depending on your preferences and the final situation.
Low deductible
Low deductible typically means you will just pay a small amount out of pocket if you need to make a claim. For example if your deductible is $100 and you experience $1000 loss you will just have to pay the 1st $100 and your insurance covers the rest. With a low deductible you will pay less if you need repairs or replacement. You know you won’t be paying much if something goes wrong.
At the same time to have a lower deductible usually have to pay higher monthly premiums. If you do not make claims often the higher premiums you pay might not be worth it.
High deductible
High deductible means you need to pay a larger amount out of pocket before your insurance covers the rest. For example if a deductible is $1000 and you experienced $3000 loss you will pay the 1st $1000 and the insurer will cover $2000. A high deductible usually results in lower monthly premium meaning you just pay less every month for your car insurance. If you rarely file claims a high deductible is your best bet as it can save you a lot of money in the long run.
You need to pay more upfront if you get into an accident or a car is damaged. If an unexpected event occurs the high deductible might be so then you are prepared to pay.
So which one should you choose? It all depends on how much you are willing to pay up front for the claim and how much you can afford on the monthly premiums.
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When do you pay a deductible on car insurance?
You need to pay deductible when you file a claim for damage to your vehicle. This usually applies to claims under collisions or comprehensive coverage. If you are involved in any accident even if you are at fault you will pay your deductible for repairs to your vehicle in case of collision insurance. In case of comprehensive insurance if your car is damaged to something non collision related you will pay the deductible for repairs.
But you don’t pay a deductible in situations where you are not filing a claim or when the damage is caused by some third party and they will be paying for the repairs.
What does non deductible mean in car insurance?
You need to know that the term nondeductible refers to a situation where you don’t have to pay a deductible. Some car insurance policies or specific types of coverage might not require you to pay deductible. Third party liability is where someone else is at fault for the accident and they have insurance you might not have to pay a deductible. The insurance will cover the damage. New car insurance is where in some cases new cars might come with a notable option for certain types of coverage during the first few years. In some situations comprehensive coverage might not require a deductible so you need to check your policy for specifics. Non deductible policies are rare and often come with specific conditions but they can provide you more immediate relief without the need to pay up front.
Why is my car insurance deductible so high?
It’s really common for you to wonder why your car insurance deductible is so high. Many drivers go for high deductibles to save money on the monthly premiums. No doubt just reduces your expenses up front but it can increase the amount you will need to pay when you file a claim.
Some insurance companies might set high deductibles especially if you have a high risk profile or if you have been involved in a multiple accident. They might also raise your deductible after a claim to offset the risk. Some policies like those for older or higher value cars might come with high deductibles.
So if you feel that your deductible is too high it’s worth reviewing your policy to see if you can lower it by adjusting the coverage or negotiating with the insurance provider.
So it is very important for you to check your policy to check if you have this type of coverage as it’s not standard.
So above all you need to know that a car insurance deductible is a very important concept to understand when buying or reviewing your policy. Whether considering a low or a high deductible it’s essential to weigh the pros and cons based on your driving habits and financial situation.
