If you are in the market for a new auto insurance policy, you may not realize how much can be affected by your decisions about deductibles. A car insurance deductible, simply put, is the amount of money that you must pay toward repairs prior to your insurance kicks in to cover the remainder. For instance, if you were in an accident which costs $3k dollars and your deductible is only $ 500, you’ll only need to pay back $500 towards the repair. But what is deductible, and why is it important?
Deductible is a dollar amount you pay to your insurer before the insurer pays out on any claim that you make. When you first purchase a policy, your insurer will ask you what deductible you want. You can choose a high one if you’re a safe driver or you can choose a low one if you are into high speeds and accident prone. Your insurer will then charge you a percentage of the total cost of replacement after deducting your deductible.
What is deductible monthly price? It is a combination of your premiums, how much of your collision (if any) and comprehensive policies will be covered and any excess coverage you request. The lower your deductible monthly price is, the less your premium will be. For instance, if you opt for a five hundred dollar deductible monthly price, your premium will be around four hundred and fifty dollars per year. This means that you will pay one hundred and twenty dollars per year on your premiums.
If you don’t make a claim for three months you will have your premiums paid in full. Then, when you make a claim on your auto insurance company would pay the other half. However, it’s important to understand that your auto company would never want you to have your cover because they wouldn’t make any money if they had to pay out for it. Your pocket will have to bear the additional cost.
Accidents are sometimes unavoidable. When this happens, your insurance covers the repairs. In most cases, the deductible you choose covers only the repairs. In this instance, you may have to actually pay for the deductible if you choose to maintain your vehicle. Otherwise, your car insurance will pay for the repairs.
If you choose a higher deductible, it would make sense to maintain your insurance. By doing so, you lower the amount that you must pay to keep your vehicle on the road. However, you may have to do some things in order to make your deductible work for you. If you get into an accident, your higher deductible will make it easier for you to get your vehicle repaired and you won’t have to spend any money to keep it running.
Many people think that choosing a lower deductible in order to save money is a bad idea. They feel like they would be better off just paying more money to cover all of the damages. This isn’t always the case. For one thing, if your accident is determined to be an accident caused by you, your premiums will go down. The other reason is that if you choose a lower auto insurance deductible, it could actually save you money in the long run. Let’s look at this a bit more.
Say that you get into an accident, even though you’ve chosen a higher deductible. Now what? If you choose the highest deductible that the company offers, it means that you will have no coverage when it comes to any repairs. Instead of covering all of the repairs, you’ll just end up paying the collision deductible, which would mean that you’d have to find the money yourself to fix your vehicle.
