How Do Car Insurance Deductibles Work?

Posted on: 2 December 2020

If you have never had your own auto insurance policy but need to buy one now, you will probably have some questions. One question you might have is about your policy's deductible. A deductible is a standard part of an auto insurance plan, and it is vital to understand what it is and how it works. Here are several essential things to know about your policy's deductible.

What It Is

A deductible is a stated amount on your auto insurance plan that tells you how much you must pay after an accident. You do not pay this amount if someone causes an accident that leaves you with damage. You only pay it when you cause an accident and need repairs for your vehicle. Some insurance coverages do not have deductibles, but others do. If you have an auto insurance policy that only provides liability coverage, you will not have a deductible. If you have collision or comprehensive coverage on your plan, you will have a deductible. You can choose a $500 or $1,000 deductible, or you might have other options.

An Explanation of How It Works

Imagine if you cause an accident and have $4,000 in damages to your vehicle. If you have collision coverage with a $500 deductible, you must pay $500 to get your car repaired. Your insurance plan covers the remaining $3,500. If you had a $1,000 deductible, you would pay $1,000, and your insurance would pay the remaining $3,000.

You Might Have to Choose Two Deductible Amounts

Another thing to know is that you might have to choose two deductibles for your policy. If you have collision coverage and comprehensive coverage, you can choose different amounts for each deductible. You can also choose the same amounts for each.

The Effects of Your Deductible on Your Policy Costs

One of the most important things to know is that your deductible affects your policy costs. If you want to pay the lowest rates for your coverage, you should choose a higher deductible. If you want to have the best coverage, you can choose a lower deductible. You pay higher costs for lower deductibles, though, so keep this in mind. You can request quotes with different deductibles if you want to compare the cost differences.

Understanding what a deductible is and how it works is vital when purchasing auto insurance. If you need to buy a plan, you can request an insurance quote by contacting a local auto insurance company of your choice.


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