How Much is an Automobile Insurance Deductible?
When selecting the right auto insurance coverage for you, an important consideration is the amount of deductible you choose. The deductible plays a role in determining your out-of-pocket expenses during a claim as well as how much you pay in premiums. Your financial situation and your ability to absorb smaller claims can help you decide, although your lender may have the final say.
Other People Are Reading
-
Identification
-
A deductible is the cost you must absorb before your insurance company pays a claim. In auto insurance, deductibles are normally associated with comprehensive and collision coverage, also known as physical damage coverage. Collision pays for damages to your vehicle that result from a driving accident, while comprehensive covers other incidents like natural disaster damage, theft, chipped windshields and vandalism. You can choose from a variety of deductible amounts when you take out a policy or add or replace a vehicle.
Amounts
-
Depending on your insurance company, deductibles may be available in amounts of $100, $250, $500 or $1,000. The amount you choose has a direct impact on your premium. For instance, if you choose a $500 deductible, your premium is lower than when choosing a $250 deductible because you are paying more out of your own pocket for damages. However, choosing a higher deductible also means you should have more money set aside to cover the higher costs associated with smaller claims.
-
Adjusting Dedcibles
-
By adjusting your deductibles as your vehicle ages, you can help to control your insurance costs. As vehicles get older, their value tends to diminish which means you will receive less from the insurer to repair or replace an older vehicle as opposed to a new one. When your comprehensive and collision premiums get to the point where they exceed 10 percent of your vehicle's "blue book" value, dropping the coverages altogether may be a more cost-effective strategy.
Financed Vehicle
-
Unfortunately, you won't always have the luxury of selecting your deductible amounts. If you took out a loan to purchase your vehicle, your lender has the right to force you to carry comprehensive and collision as well as the amount of the deductibles to protect its interest. You won't have much freedom of choice until the vehicle is paid off and you attain sole ownership. If you try to raise the deductibles above the amounts stipulated in your lending agreement, your insurance company is obligated to notify the lender.
-
References
- Photo Credit The new powerful car in modern city image by terex from Fotolia.com
