Understanding Auto Insurance Deductibles

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One of the many tips that we usually receive as we try to save money on insurance premiums is to increase our deductibles. You are probably asking the question how to do that, or how safe is that in case you decide to increase the amount. Or what if you had an accident, how will deductible play its cards?

In this article, we are going to discuss what deductible is, how it is going to impact on your insurance premium costs and to the coverage as a whole, and what possible benefits will it provide to policyholders.

You may or may not have heard of insurance deductible, or the concept has not been clear to you. Deductible is taken from the word deduction. Deductible is offered as part of comprehensive and collision coverage. During an accident, this amount is taken from your own pocket to finance your repair needs and other expenses. After your deductible has been exhausted, that will be the time that your insurance company will kick in. In order to understand the whole situation, let us consider the following scenario.

You had an accident and the police report indicates that you were the at-fault driver. You then file insurance claim to cover for the damages. During the time, you purchased your insurance, you have chosen for a $500 deductible. After some evaluation, it was found out that the entire cost to repair your vehicle is $2200. So the insurance company will only pay you $1700 because you have a $500 deductible. Based on the example above, there is nothing fancy about deductible. It’s straightforward and easy to understand. However, if you know how to manipulate it, it could save you hundreds of dollars on your premium cost.

Your comprehensive or collision coverage comes with a few varieties in terms of how the deductibles are applied. The amount varies depending on the insurance provider, therefore, it is best to contact your insurer and ask what particular amount is available for the taking. If you loaned your vehicle or made some other types of loans to purchase your vehicle, some lenders require specific deductible levels, so it is best to contact them as well.

We mentioned earlier that increasing your deductible could save you money. This is possible and considering you are already taking a huge part of your risk, you deserve to receive insurance price cuts. Since you are paying the deductible amount from your own pocket, just make sure that it is within your capacity to pay in the event of an accident.

Some experts are quick to point out that you should only set a deductible amount and have at least three times of the same amount in your bank account for safekeeping. For instance, if your deductible is set to $1000, you must have at least $3000 at any given time.

Choosing for a higher deductible to lower down the rates can be very tempting. But then again, if you are unsure that you can’t keep or pay for it during an accident, it is best to keep it lower or talk to your insurance agent for proper guidance.