Deductible auto insurance often confuses policyholders. They buy auto insurance plans without understanding how deductibles work and regret their choices later. If you’re in the same boat, now is the right time to clear up any confusion you may have.
Here, we will walk you through all the details about deductible auto insurance to help you make an informed selection.
Find Cheap Auto InsuranceWhat Is Deductible Auto Insurance?
An auto insurance deductible is the amount you pay on a claim of damage repairs before your insurance provider pays for the rest. Deductibles apply to collisions, comprehensive coverage plans, uninsured motorists, and personal injury protection coverages.
When you apply for auto insurance, your insurance provider may ask you to choose between high and low deductibles. While both have their pros and cons, most people prefer a mid-way option to save costs. We will thoroughly guide you about choosing between higher and lower deductible costs.
However, let’s focus on how deductibles work when filing claims.
Understanding Auto Insurance Deductibles
Auto insurance deductibles apply every time you are in a situation to claim collision or comprehensive insurance coverage. The idea behind deductibles is to share the cost of vehicle repairs with your insurance provider. Now, a common question some policyholders may have is why they need to pay an insurance cost if they must share the repair costs with the provider.
Insurance companies provide a service to people, offering different auto insurance plans against a certain fee. If you do not have insurance coverage, you must bear all the costs by yourself. Since insurance providers minimize that burden, they charge a fee for this service to keep the ball rolling. Plus, insurance providers offer multiple benefits to policyholders based on their coverage plans.
How Do Deductibles Apply?
When you have a car accident, you can pay the stated deductible amounts for vehicle repairs and file the claim to your insurance provider for the rest of the coverage. Once your insurance company reviews and verifies the details, they pay you the remaining amount to compensate for repair costs.
For instance, consider the scenario in which you have a $700 auto insurance deductible, and you have to pay $3,500 to cover the repair costs. Your insurance company will deduct your part of the expense and issue you a check for the remaining payment ($2,800).
Please note that insurance deductibles vary for each coverage plan based on the policyholder's preferences. There is no right or wrong deductible proportion. However, your preferences for higher or lower deductibles can affect your insurance costs and savings.
The Impact of Auto Insurance Deductible on Your Coverage Rate
When you get an auto insurance plan with lower deductibles, the costs remain higher, leaving you with no edge on the savings front. While valid, adjusting deductibles can help you lower the insurance coverage costs. For instance, if you opt for a $100 deductible, you must pay $420 for a six-month policy. If you increase your deductibles to $250, the cost will come down to $300.
Following this trend, the higher your deductibles, the lower the insurance plan costs for a six-month policy. An important factor you must remember is that the impact on cost savings will be the most when going up from $100 to $250 (29%). As you go higher, the savings will reduce and be the lowest, between $1000 to $2000 (17%).
Please note that these figures (insurance costs) are hypothetical and may not apply to an insurance plan offered by one of the service providers in your area. You should thoroughly check and compare the prices and adjustment figures based on your coverage plan.
Comparing High and Low Auto Insurance Deductibles
When deciding on your auto insurance deductibles, keeping your facts straight is highly crucial.
Typically, auto insurance deductibles range between $100-$2000. While most vehicle owners opt for $500 as deductibles, there is no restriction on making this selection. While valid, here is how deductibles impact your insurance costs and out-of-pocket payments.
- Higher Insurance Deductibles = Lower Rates and Higher Out-of-Pocket Costs
- Lower Insurance Deductibles = Higher Rates and Lower Out-of-Pocket Costs
Additionally, you should keep the following factors in mind.
Risk Tolerance Assessment
Your financial status and monthly expenses have much to do with your deductibles. If you have savings for emergencies, like vehicle damage repairs, go for a higher deductible. On the contrary, tight finances may lead you to opt for lower deductibles. When uncertain about your financial situation, you might not be able to determine whether you can pay higher deductibles in case of emergencies or not.
Monthly Premium Management
Regardless of your financial situation, you must decide between paying higher or lower monthly premiums. Higher premiums mean you can choose lower deductibles. Lower monthly premiums mean higher deductibles. It is worth noting that you must pay the contracted premiums despite your coverage needs. For instance, if you claim your insurance twice or thrice a year, you still have to pay the premiums on a monthly basis.
Coverage Assessment
Coverage assessment is the most important factor to consider when deciding on your auto insurance deductibles. If you frequently require insurance coverage based on driving habits, lower deductibles may fit your needs well. On the other hand, rare insurance claims based on good driving habits can make higher deductibles a better option. When you have minimal chances of coverage claims, you can save yourself from paying high premium costs each month.
Insurance Coverage Type
Your deductibles may vary based on your insurance coverage type. When deciding on your coverage plan, you might want to compare the features of each and pick the ones that offer you the best benefits. Paying higher deductibles for minimal coverage plans may not be a wise choice.
Vehicle Value Evaluation
Your vehicle’s value can greatly impact your auto insurance deductibles. If you buy a new car, opting for lower deductibles may help protect your potential investments. Conversely, older vehicle models may have lower repair and part replacement costs, making higher deductibles a viable option.
Claim Approval and Receiving Your Insurer’s Payout
If you wonder how you can receive your insurer’s payout after paying your deductibles, let us help you. When you pay your deductibles, you can file your claim and wait for your insurance provider’s approval. Once your claim is approved, your insurance provider will issue a check for the remaining amount (after deducting your deductibles) to your name.
For instance, if you have a claim approved for $4,000, and your deductible is $250, your insurer will issue you a check for $3,750.
Paying a Deductible When Hitting a Car
Another important factor every policyholder should know regarding auto insurance deductibles is that you do not have to pay your deductibles if your car remains undamaged when causing an accident. In such scenarios, your insurance provider will be liable to cover for the injuries and damages caused to other drivers.
You only have to pay the deductibles if you receive damages on your car and file for a collision claim.
Paying a Deductible When Not at Fault
When the other driver is at fault (officially), you do not have to pay a deductible since the other driver’s insurance company will cover your damages and injuries. Some policyholders prefer seeking help from their own insurance provider. In such scenarios, the insurance company seeks reimbursement from the other party’s insurance provider.
Scenarios Where No Deductible Applies
In certain scenarios, no deductibles apply to your end when filing for a claim. We have covered the details of each below.
When Another Person Claims Against Your Coverage
If you cause an accident and the other driver chooses to file a claim against your insurance coverage, you do not have to pay any deductibles.
In the Case of Disappearing Deductibles
Some insurance companies provide a disappearing deductible policy to vehicle owners. This option lowers your deductibles for a set proportion through each violation, making it $0 after a certain claim-free period.
In the Case of Free Glass-Claim Repairs
Some states allow your insurer to repair or replace your vehicle’s windshield glass without requiring you to pay deductibles. Some insurers waive your deductibles if they can repair your windshield glass instead of replacing it.
Choosing the Best Insurance Plans With BindRight
The above information highlights all the details about deductible auto insurance. We have covered different scenarios where deductibles are applicable and also shed light on insurance costs for high and low deductibles. These details come in handy when choosing the best insurance plan for your vehicle.
BindRight is one of the leading insurance comparison platforms, giving you the opportunity to compare multiple coverage plans at once. You only need to enter the Zip code of your area to explore various insurance deals around you. Feel free to get started.
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