Understanding Car Insurance Deductibles
When you buy auto insurance, one of the decisions you need to make is how high to set your deductible. The deductible you choose has a direct effect on the price you pay for insurance.
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Definition
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The deductible is the amount you pay toward any covered loss before the insurance company begins to pay. Deductibles typically apply to comprehensive (or comp) and collision coverages.
Deductible Vs. Premium
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Setting your deductible higher results in lower annual premiums. For example, if you choose a $500 deductible, your premium could be 30 percent lower than if you choose a $200 deductible. However, you must make sure you can afford to pay the higher deductible if your car is ever damaged.
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Windshield Coverage Deductible
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Some insurance companies charge a separate deductible for replacing damaged windshields.
Purpose of Deductibles
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Deductibles help keep insurance costs down because they encourage consumers to pay small repairs themselves rather than submitting claims for such repairs.
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References
- Photo Credit car crash image by dawn from Fotolia.com
