An insurance deductible is one of the things that may confuse many drivers when they think about their car insurance policies.
The main concern is that they will have to pay a lot of money out of pocket every time they make a claim, and that leads to a desire to get their deductible as low as possible – which often means higher insurance rates.
The first thing you need to know is a deductible is the portion of money you must pay before your insurance providers pays out when you file an auto insurance claim. If you select a higher deductible, it will lessen your premium, but you need to be sure you can afford to pay it should the need arise.
Why does an insurance deductible exist?
The primary reason insurance companies have deductibles is to avoid small claims that will take up more resources than they are worth. Imagine the workload on the insurance company if every door ding and scratch became a claim; that is what could happen without deductibles.
The deductible allows insurance companies to keep their rates lower for everyone by having a small portion of specific claims paid by the insured. It saves the insurance company a lot of money and time, and in the end, it saves you money too.
When do I have to pay my auto insurance deductible?
A lot of the confusion about deductibles revolves around when they apply. Many people worry that they will have to pay a deductible on any claim they make.
For instance, if you are in a collision and are not at fault, are you required to pay your deductible to get your vehicle fixed? The answer is no. You will pay the collision deductible, however, if you are found to be at fault. The exception to this may be a hit-and-run accident. That is because there is no other driver to take responsibility. It’s also to prevent drivers from making hit-and-run claims on the damage they may have done to their cars.
The comprehensive deductible applies in any incident that is not a collision, like theft, vandalism, or damage to your vehicle when it is not in motion. It applies in nearly every claim against your comprehensive coverage.
How high should my auto insurance deductible be?
One of the biggest insider tips regarding deductibles is that with most insurance companies, you can have two different deductibles, one for each type of coverage. That means, for instance, you can carry a higher deductible on your collision and a lower one on your comprehensive.
Collision insurance coverage is much more expensive, and you are much more likely to have a very high-cost claim against this coverage. The higher your deductible, the more the insurance company will lower your rate in return for you taking on some of the risk. Comprehensive coverage generally costs less, so there may be less benefit to increasing the deductible. That means you can carry a lower deductible since you are more likely to have to pay it if you file a claim.
What if I have to pay a deductible?
The biggest concern most people have about a deductible is that they don’t have enough money to pay for it. This is a valid concern. In most cases, the deductible is taken off of the amount of money the insurance company pays, either to you for a totalled car or to the repair shop. In the case of repairs, you will have to pay the remainder of the bill.
Fortunately, there are plenty of repair shops that will work with you on the deductible to make it easier to pay. You can choose where you want repairs to be done, but it never hurts to ask your insurance provider if they have partnerships in place with any repair shops in your neighbourhood. In some instances, they may require you visit a preferred shop.
Over time, the insurance savings add up
Carrying a higher deductible can be worrisome, but the odds are that if you’re a good, safe driver, you won’t need to pay it. The longer you go without paying it, the more money you save. Once you’ve saved on your premium the amount you might have paid on a higher deductible, you start to find yourself ahead of the game.
Deductibles are straightforward when you understand them, and they are one of the ways you can keep your car insurance premium low.
Speak with your broker to find out what level of deductible is best for you.
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