How Auto Insurance Deductables Work

Explanation

An insurance company does not bear all the risk when issuing a policy, and an auto insurance policy does not take care of all expenses when there is an accident that results in a claim. Insureds are required to pay a portion of the damages, depending on the policy. Even though premiums are being paid for a policy, individuals still need to pay some amount before insurance applies.

Deductible Amounts

A deductible can come in various amounts, depending on what an individual wants to pay when a claim is submitted to the insurer. The lowest amount generally starts at $250 and can go as high as $1,000 or more. The standard deductible for a car insurance policy is usually around $500, but many people are increasing this to save money.

Higher Deductibles

Selecting a higher deductible will lower the premium that is paid for the policy. This is because it represents less than an insurer will need to pay if there is a claim or accident. Many car insurance companies offer what is called a high-deductible policy. This type of policy can start with a deductible at $1,500 and go as high as $2,500. However, an insured will always have higher out-of-pocket expenses, depending on the amount of the claim.

Lower Deductibles

Selecting a lower deductible will increase the cost of a car insurance premium. However, a lower amount means that it is less an insured needs to pay before insurance kicks in when there is a claim. Selecting a lower premium amount depends on where an individual would like to save money. A smaller deductible results in a higher premium amount for a policy.

Price Quotes

When getting a price quote for car insurance, get more than one, with different deductible amounts. This way any change in the deductible amount that changes the premium amount can be seen in the price quote. Compare quotes to see the best price based on a higher or lower deductible amount.

Premium

It may be beneficial to pay for repairs resulting from an accident if the total amount is not much more than the deductible. An insurance premium can increase when multiple claims are filed after an accident. An individual will need to decide if it is worth risking a higher insurance premium when submitting small claims to the insurer.