One of the most confusing decisions when it comes to buying a car insurance policy is how much of a deductible you want to carry. The deductible is the amount of money you will have to pay out-of-pocket for injuries or property damage if you cause an accident and have to file a claim.
As an example, if you have an accident that causes $2000 in damage to your car and you have a $1000 deductible, you will have to pay $1000 and your insurance policy will pay for the second $1000 to have your car repaired.
Unlike health insurance, there is no reaching a deductible limit by the end of the year. If you have two accidents in the year, you will have to pay your deductible twice. In our example, this would mean $2000 out-of-pocket.
It’s important to understand the relationship between your deductible and your monthly premiums.
Essentially:
- A higher deductible allows lower monthly premiums but higher out-of-pocket costs
- A lower deductible means higher monthly premiums but lower out-of-pocket costs
One thing to note is that if your damages are less than your deductible, you will end up paying for the total costs of repairs. In our example of a $1000 deductible, if your damage costs are $500, you will have to pay the whole $500 out-of-pocket. Oppositely, if you total your car your insurance company will pay you for the current value of your car, but they will subtract the deductible amount.
When You Have to Pay Your Deductible
Collision and comprehensive coverage are usually the two types of coverage that require a deductible. If you cause an accident, your deductible is required to be paid to repair your own car, not the cars of any others involved in the accident.
When You Don’t Have to Pay Your Deductible
If someone else causes an accident that results in damage to your car, you will not have to pay your deductible. If you are not at fault, you do not have to pay.
Also, many policies offer a waiver of your deductible for certain types of damage such as glass damage. If your windshield or window is chipped or damaged, by road debris for instance, you won’t have to pay your deductible for the repairs.
If the cost of the repairs to your vehicle are less than the amount of your deductible you won’t want to pay your deductible. Depending on your financial situation and the nature of the damage, you may even skip the repairs altogether.
If you want to see how much your monthly payments will change with different deductible amounts, you can use the fast and easy InsuranceWins form. Simply fill out the form and you can see how a higher or lower deductible will affect your payments.
