This is an area in auto insurance that your personal circumstances and preferences can play an important role. Some people like to keep deductibles as low as possible and some may have to choose them low due to financial strains. However, it can be a great tool to reduce premiums. When you are struggling to afford the coverage you desire you could fine tune coverage and premium using this tool as well. So, how do car insurance deductibles work is explained in detail below. You could read further on; how does auto insurance work, once you finish here.
What Does a Deductible Mean for Car Insurance?
A deductible is the amount to be paid by the policyholder before coverage kicks in. It is an out-of-pocket payment agreed on the policy and payable by the policyholder when a claim is settled. So, initial part of the claim is covered by the policyholder and the rest by the insurer. That is why you may need to think twice if some small claims are worth making looking at vehicle insurance deductibles explained here. This paragraph also explains when do you pay your share of a claim on car insurance; at the end of a claim settlement if you ever make one and it is defined in your policy.
They are great tools in disposal of both vehicle insurers and policyholders. Insurers make sure that they reduce the number of small claims substantially by setting up auto insurance deductibles as a barrier. Most of the insured vehicle damages are small scratches, bumps and bends. They are too small to make especially after deductibles are paid out of your pocket. Automobile insurers not only avoid paying them but they save on administration costs of dealing with them thanks to deductibles barriers they set. And also vehicle insurance 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 in case of claims or deliberately increase them so that they can reduce premiums. When a policyholder is increasing deductibles he/she is committing to increase his/her small claims barrier. That is why most insurers are happy to return the favor with lower premiums.
How Do Auto Insurance Deductibles Work
If you have a Comprehensive and Collision Coverage and you crashed your automobile onto a lamppost, your collision coverage kicks in. For example, if the damage to the vehicle is $4,000 and you have $500 collision deductible, you pay the first $500 of the repairs and your insurer pays the rest of $3,500. Regardless of the size of the claim you pay $500. If it was only some scratches and damages were $450, there is nothing to claim as you cover the loss out of the pocket.
In most cases, policyholders are able to choose deductibles especially when they want to increase them. Some auto insurance covers come with the requirement of a pre-determined out of pocket payment in case of claims and some don’t. Usually, liability policies come with no deductible and you can have several different amounts depending on additional covers you choose. Collision, Comprehensive and Gap (for loans and leases) Covers typically come with deductibles. In some cases, Personal Injury Protection and Uninsured Motorist Coverage may have it as well.
Do You Pay Car Insurance Deductibles If You Are Not At Fault?
This totally depends on how you proceed with your claims. Normally, you shouldn’t pay deductibles if the claim is settled by at fault driver’s (or a third party) insurance company as they accepted responsibility for your losses. First of all, third party driver would need to be deemed at fault and have insurance to pay your losses. Secondly, you need to claim directly with the at fault third party’s insurer.
However claim may not go as quickly as you want with the third party or their insurer. Then, you may need to look at your alternative options. After the accident it could take long to determine who is at fault and you may not have patience to sit around while your car is not being repaired. You may decide to ask your insurer to pay the claim if you have coverage even though you believe the other driver’s insurance should pay.
Your vehicle insurer pays for your repairs and you pay the deductible. If your insurer can subrogate the money paid from third party insurance company at a later stage, they pay the amount you paid earlier back to you and change the status of the claim as no fault.
Glass Claims and Automobile Insurance Deductibles
If you have Comprehensive Coverage you can claim for glass repairs or replacements. Generally, glass claims have either very low or no deductible as most companies separate them from other comprehensive claims.
Auto Theft Claims and Car Insurance Deductibles
Vehicle theft is covered by Comprehensive Coverage. If your auto is stolen you will need to pay comprehensive deductible. If it is not found, you will get the cash value of your automobile minus your agreed share of the claim 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 your share again and rest of the repair costs will be settled by your insurer.
Accidents with Uninsured Drivers Who Are Deemed to Be At Fault
If you have collision and uninsured driver coverage you may have Uninsured Motorist Collision Deductible Waiver included in your policy. This provision will take care of the expected out of pocket payment for you. Some states require this coverage to be included when collision coverage is sold. However, it may be option in your state. If you didn’t take it you may need to pay either collision or uninsured motorist coverage out of pocket amount as usual.
Saving without Giving up Coverage with Auto Insurance Deductibles
Motorists may find that their premiums are too high for them and think about giving up some of the coverage. Another option would be to increase the deductibles. When they are increased the premiums are likely to come down. If the premium comes down enough you may be able to keep your coverage.
Insurance costs are based on risks. By increasing your share of the risk as explained above, you would be reducing some of the burden off your insurer and therefore you should pay lower premiums. It would be great if you could have low deductibles and high coverage. However, it may mean too high automobile insurance premiums and you may need to play around to see what the best option for you is.