What’s a deductible in car insurance? – Insurance communications community

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Car insurance is complicated. Whether you're a new driver or have been behind the wheel for years, digging through insurance terminology like "deductible" can be daunting.

Your auto insurance deductible affects the cost of your insurance, so it is important that you choose one wisely. Which deductible is the right one for you depends on your individual circumstances.

Here is everything you need to know about car insurance deductibles.

What is a deductible in car insurance?

If you need to file a claim with your car insurance company after an accident or other damage to your car, there is a good chance you will have to pay a deductible. So how does a deductible work?

A deductible is the amount you pay out of pocket before your insurance coverage begins and the cost of your damage begins to pay. You are responsible for your deductible every time you make a claim.

Say you have a car accident and your car needs $ 8,000 worth of repairs – if your deductible is $ 500, you must pay that $ 500 before the insurance company pays the remaining $ 7,500 in damages. If your car is totaled, the insurance company will send you a check for the value of the vehicle minus your excess.

Your monthly insurance premium is separate from your deductible. Not all insurance policies require a deductible, but if yours does, it is up to you to determine the amount. Your deductible affects your monthly insurance benefit – the lower your deductible, the higher your car insurance premium.

When looking for offers from auto insurance companies, experiment with how different deductibles affect your monthly payments.

These are the general guidelines:

* Higher deductible = lower premiums for higher expenses

* Lower deductible = higher premiums with lower expenses

Through Credible's partner, Young Alfred, you can compare car insurance quotes from multiple insurance providers for free.

Which car insurance policies have a deductible?

Car insurance can have different types of coverage for different purposes and you can choose whether to be covered by some or all of them. Some of these insurance options require deductibles and some don't, so it is worth mentioning which deductibles you will need to pay. State law generally determines whether or not a deductible is required.

These types of coverage require a deductible.

* Collision Protection – This covers you if your vehicle collides with another vehicle or object and you have to pay for repairs. Collision deductibles are standard, but vary depending on the insurer.

* Comprehensive Insurance – If your vehicle is damaged by an incident such as fire, a falling object on the windshield, or vandalism, make a fully comprehensive insurance claim. Deductibles are usually required for this type of coverage and also vary depending on the insurer.

These types of insurance do not always require a deductible.

* Liability Insurance – Liability insurance will protect you financially if you are responsible for the death or injury of another person as a result of a car accident. It can also help cover repairs to the other party's damaged property.

* Personal Injury Protection – This type of coverage covers medical bills, funeral expenses, lost wages and other costs incurred as a result of an accident, regardless of fault. Deductibles are not absolutely necessary for personal protection.

* Uninsured / Underinsured Motorist Property Damage Coverage – If the other driver is to blame for an accident but is not insured or does not have enough coverage to pay for your property damage, this type of coverage comes to the rescue. Deductibles are sometimes, but not always, required for this coverage, and the requirements vary by state.

What is the average car insurance deductible?

While your auto insurance deductible can vary widely, depending on many factors including the amount of the deductible, the deductible is typically between $ 100 and $ 2,500. The most common deductible is $ 500, but remember that there is no one-size-fits-all option when choosing a deductible. Your budget, your confidence in your driving skills, and how often you drive your car are all factors that will determine your decision.

Through Credible's partner, Young Alfred, you can easily compare car insurance quotes from different insurance providers in minutes.

How does my deductible affect my insurance premiums?

It may be tempting to choose a higher deductible to keep your monthly costs down, but that's not always the right move. Think carefully when choosing your deductible: if you go too high and have an accident, the cost of reporting it can be financially devastating. On the other hand, if you choose a very low deductible, you will be responsible for a high monthly payment.

While no two insurance companies have the same deductible-to-premium ratio, increasing a deductible from $ 200 to $ 500 could cut your collision or total premium costs by 15 to 30%, according to Nationwide.

When do I have to pay my car insurance deductible?

You must pay your deductible each time you make a claim, provided there is a deductible. If the insurance company approves your claim, the deductible will be added to your payout.

Usually, you don't have to pay your deductible by writing a check or paying your insurance company. Instead, the insurance company will deduct your deductible from the approved payout of your claim. This means that if you've approved a $ 10,000 claim and your deductible is $ 500, you will receive a payout of $ 9,500.

What factors should I consider when choosing a deductible?

There are several factors to consider when choosing a deductible, including your budget. Take the time to calculate how much you can afford to pay a deductible and how much you will save on your monthly premiums if you choose a higher one.

Ask yourself these questions when choosing a deductible.

* Do you have an emergency fund? A solid emergency fund could allow for a high deductible that can help you save on monthly premium payments. You need this buffer in case the worst happens, but if you are a safe driver or don't drive often, using an emergency fund to cover accidents can be an option.

* Can you afford your excess in the event of an accident? This is an important question when choosing a deductible. Can you afford the excess in the event of an accident or would you have trouble paying it?

* What is the value of your car? Taking on a high deductible may make little sense if it is a large part of the value of the car. If your car is only worth a few thousand dollars, consider a lower deductible.

When you're ready to start shopping around for auto insurance, visit Credible's partner, Young Alfred, to compare auto insurance quotes and see how much you can save.

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