How Do Car Insurance Deductibles Work?

Personal circumstances and preferences can play an important role in choices made in this area. Some people like to keep auto insurance deductibles as low as possible and some may have to go low due to financial strains. However, it can be a great tool to reduce premiums. When you are struggling to afford the coverage you want you could fine-tune it using this tool. It may appear to be non consequential or even a given figure at times. This post will try to demonstrate that it is worth knowing how you can play with it and influence the costs before or after a claim.

What Does a Deductible Mean for Car Insurance?

It is the amount you have to pay out of pocket each time you have a claim. So, initial part is covered by the policyholder and the rest by the insurer. You can have it high or low and these choices are reflected on premiums.

That is why you may need to think twice if some small claims are worth making looking at the role of the concept we discuss here. You need to pay your share of the losses at the end of a settlement.

They are great tools in disposal of both companies and policyholders. Underwriters make sure that they reduce the number of small claims substantially by setting them up as a barrier. Most traffic incidents are scratches, bumps and bends that can be paid out of pocket. Yet, carriers want to avoid them for two reasons. They may be negligible as one but thousands of them adds up to a large amount. Secondly, they like to save on administration costs of dealing with them. And the way of doing so is setting up higher policy deductibles so that people choose to deal with them on their own. It may seem like a sneaky thing to do but premiums would have been much higher if there wasn’t such mechanizm to take these small losses out of the system.

Policyholders can choose to search for lower out of pocket payments or deliberately increase them so that they can reduce premiums. When they push them up they commit to increase claim barrier. That is why most carriers are happy to return the favor with lower rates. Hopefully, the balancing act we are trying to emphasize here is making sense so far.

How Do Automobile Insurance Deductibles Work

If you have full coverage and you crashed the automobile onto a lamppost, Collision component kicks in. For example, if the damage to it is $4,000 and you have $500 collision deductible, you pay the first $500 of the repairs and the carrier settles the remaining $3,500. Regardless of the size of losses you cough up $500. If it was only some scratches and damages were $450, there is nothing left to compensate and the case is closed, even before it is opened. So, you don’t need to bother the agent.

In most cases, policyholders are able to choose them especially when they want to increase them. Generally you cannot go lower than the pre-determined amount set out in a quote. Usually, liability component comes with no deductible and Collision, Comprehensive and Gap (for loans and leases) typically come with it, although each may be different. In some cases, Personal Injury Protection and Uninsured Motorist Coverage may have it as well.

Do You Pay Vehicle Insurance Deductibles If You Are Not At Fault?

This totally depends on how you proceed with it. Normally, you shouldn’t spend any money if the claim is settled by at fault driver’s auto insurer as they accepted responsibility for your losses. You would need to apply directly to them after being provided with the details. If it goes smoothly you don’t have to spend single penny.

However, it may not go as quickly as you want with the third party. Then, you may need to look at alternative options. After an accident it could take long to determine who is at fault and you may not have patience to sit around while the car is not being repaired. You may decide to use your own coverage for a quick settlement even though you believe the other side should come up with the money.

Your carrier takes on the repairs and you pay the deductible. If they can subrogate the money paid from third parties at a later stage, they refund the amount to you and change the status of the claim as no fault.

Windscreen Repair or Replacement Settlements

Comprehensive component compensates glass works. Generally, windscreen has either very low or no out of pocket figure as most companies separate them from other Comprehensive perils.

Auto Theft Claims and Insurance Deductibles

Comprehensive component handles vehicle theft too. If the auto is stolen you will need to pay your share. If it is not found, you will get its cash value minus your agreed share so that you can buy a similar automobile to replace it. If it is found and there are some damages to it, you will pay the share again and the rest of the repair costs will be settled as usual.

Accidents with Drivers Who Were At Fault and Without Coverage 

If you have Collision and Uninsured Motorist coverage you may have Uninsured Motorist Collision Deductible Waiver included in the policy. This provision will take care of the expected out of pocket payment for you. Some states require it to be included when it is sold. However, it may be optional where you live. If you didn’t take it you may need to meet the amount set for either Collision or UM as usual.

Saving without Giving up Coverage

Motorists may find that premiums are too high for them and think about giving up some of protection. Another option would be to increase the risk you take by agreeing to contribute more in case of claims. When they go up premiums are likely to come down. If they come down enough you may be able to keep coverage.

Quotes are based on risks. By increasing your share of the risk as explained above, you would be reducing some of the burden off the carrier and therefore you should pay lower prices. It would be great if you could have them both. However, it may mean too high costs and you may need to play around to see what option gives you the best value.