How do deductibles work with car insurance? – Kelley Blue Guide

When taking out car insurance, some types of insurance have a deductible, others do not. If you need to make a claim, you may have to pay a deductible before the insurance company pays the bill. This is how it works.

Deductible vs. Premium: What's the Difference?

When you take out car insurance, the price that the company tells you applies to the premium. This is the amount you pay to have insurance cover during the term of the contract – usually six or 12 months.

If you need to make a claim after an accident or breakdown, you may need to pay a deductible. This is the amount you will pay before your coverage takes effect and it is independent of your premium. After you have paid the deductible, the insurance will cover the rest up to the policy limit.

For example, let's say you have an accident that damages your car worth $ 3,000. If you have a $ 500 deductible, you pay $ 500 for repairs and the insurance company pays the remaining $ 2,500.

When does my car insurance deductible apply?

Whether or not you have to pay a deductible usually depends on two important factors – the type of claim you are making and who (if anyone) was to blame.

Coverage type

When you take out standard auto insurance, you can include five main types of coverage. Some have a deductible, some don't. If you claim damage under your collision or fully comprehensive insurance, you have to pay a deductible.

But liability and health insurance coverage do not have a deductible. "The insurance company doesn't want to stop a customer from filing a claim after harming someone or damaging someone else's property," said David Miller, vice president of The Plexus Groupe, a national insurance broker based in Illinois.

Depending on where you live, you may or may not have to pay a deductible when filing Personal Injury Protection (PIP) or uninsured motorist property damage. Different states have different rules.

who's to blame

If you have an accident and another driver is at fault, their liability insurance should cover your injuries and vehicle damage. And you don't have to pay anything. But it doesn't always work that way.

If there is a dispute about the guilt, if you are hit by an uninsured driver or if the claims process is protracted, you can file a collision claim with your insurer. "You will prepay your deductible, but your (insurance company) will try to collect it in the end," Miller said.

If your insurer can reimburse the deductible, they will reimburse you for the amount paid.

Do I pay my car insurance deductible per claim or per year?

Deductibles are paid per claim. For example, let's say you are hit by an uninsured driver. After the accident, you submit a collision claim to your insurer to have your car repaired. You pay the excess, collect your reimbursement check from the insurance company and take your car to the body shop. When they're done with it, it's hard to tell you've had an accident.

Unfortunately, a few weeks later, a hurricane devastated your city and uprooted a tree that ended up on your car. You submit a comprehensive claim to the insurance company in order to repair the damage. Even if you have just paid a deductible for the accident you suffered, you will have to pay a deductible again for the new damage.

How to choose a car insurance deductible

When purchasing auto insurance, if you have an excess with an excess, you will need to select your excess (s) when purchasing the policy. Deductibles typically range from $ 100 to $ 2,500. “A low deductible encourages people to make claims. (Insurance companies) set their tariffs to deter you from making a claim, ”Miller said.

Increasing the deductible can help lower your premium. But the amount you save by increasing your deductible tends to decrease the higher it gets. According to Miller, if you increase your deductible from $ 250 to $ 500, you'll see the greatest savings on your collision premium. But you won't see much of a difference increasing it from $ 500 to $ 1,000.

"If I double your deductible from $ 500 to $ 1,000 and (you) save just a few dollars, it's probably not worth it," he said.

Miller said he sometimes recommends a lower deductible for full coverage, as it usually costs less than a collision. And it covers broken glass.

When choosing an excess, it is important to consider how much you can pay for out-of-pocket repairs. And choose a deductible that suits your affordability.

RELATED STORIES: Should I Cancel Accident Insurance?

Can my deductible be waived?

If your windshield cracks or breaks and you have comprehensive auto insurance coverage, here are some things you need to know. Having full glass coverage means you can claim repairs to your windshield damage, and some insurers may waive your deductible if you have full glass coverage. However, you pay an additional premium for this coverage.

In another instance, if you drive a Ford Explorer or Acura MDX, your insurer is unlikely to waive your deductible. But if you drive a Bentley or a Ferrari, you might be in luck. Insurance companies that work with high net worth individuals often have policies that waive the deductible on high-end cars if they are totaled or stolen.

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