Car Insurance Deductibles Explained

When it comes to car insurance, it’s important to understand what your policy covers and what it does not. Most car insurance companies allow you to choose options which best suit your needs. The deductible is one of the most important options you will select, as it has a direct affect on how much your insurance premium will cost.

A car insurance deductible is the amount of money you agree to pay out of your pocket. This money must be paid before your insurance carrier will pay your claim. Let’s say you are involved in an accident that causes $5,000 worth of damage to your car. Now, let’s say your chosen insurance deductible is $500. You will pay $500 toward the damage repair expense and your insurance company will pay the remaining $4500.

Car insurance deductibles apply to comprehensive and collision coverage. Comprehensive covers damage caused to your vehicle by anything other than another vehicle. This might include damage caused to your car through hitting a deer. It will also cover damage causes by vandalism or acts of nature, such as hail or wind damage. Comprehensive insurance also covers the theft of your car.

Collision covers damage caused to your vehicle due to a collision with another car while on the road. Both of these types of coverage carry their own deductible.

Car insurance deductibles for comprehensive and collision coverage typically range between $250 and $1500. The higher deductible amount you chose, the lower your insurance premiums will be. Choosing a deductible of $1500 could potentially save you between 10 and 20 percent off your insurance premiums.

However, it’s important to choose a deductible that you can afford. It’s also important for you to deposit the deductible amount you have chosen into an interest-bearing savings account so that you can easily access it should you ever need it.

There’s nothing worse than being involved in an accident, then not being able to afford to get your car repaired because you don’t have the deductible. Many Americans simply do not have $500 to $1500 lying around and oftentimes find it difficult to come up with their deductible when they need it.

If you are unable to deposit the full amount of your deductible, at minimum put some money into an account each week. This could be as little as $10 if that’s all you can afford. Hopefully, you will never need the insurance deductible. However, knowing it is tucked away in the bank can provide you with considerable peace of mind.

Most car insurance companies provide deductible calculators at their website. Through a series of questions, they can help you determine which deductible is best suited for your budget. If your car insurance carrier does not offer this tool, check competitor’s websites to see if they offer it.

Even if you do not change insurance carriers, there is no reason you cannot use all the tools available to help you make an informed decision.

Before you make your final decision, take time to compare the different plans available. Do the math and determine how much each policy will cost you, along with listing the pros and cons of each scenario.

If you still find yourself confused or in doubt, speak directly to an insurance agent. Most car insurance websites now allow you to speak directly to an agent via instant messaging chat. Others provide a toll-free number so you can speak to a representative without incurring long distance charges.