Auto Policy 101: What Is A Deductible?

An auto insurance deductible is the amount of money you’re responsible for paying before your insurance covers the rest of the damages incurred in a claim. This amount may range from $100 to $1,500, depending on the state and insurance provider. So, for example: if you have a $250 deductible and you are in an accident that caused $2,500 in damages, you will pay $250 and your auto insurance company will pay $2,250.

Insurance Deductible Explained

So why would anyone choose to pay $1,000… if they could get away with paying only $100 instead? One way you can lower the total cost of your annual auto insurance coverage is by choosing a higher deductible. Since you will cost the insurance company less should an accident occur, they are willing to offer you a lower rate in return. Basically, you need to calculate the risks associated with owning and operating a vehicle.

  • What is the likelihood your car will be vandalized?
  • What is the likelihood someone will steal your belongings from your car?
  • What is the likelihood you’ll be involved in an accident?
  • What is the likelihood a natural disaster will cause damage to your car?
  • What is the likelihood you’ll hit a deer or another type of animal?

You want to make sure you are able to save enough money in reserve to cover whichever auto deductible you choose.

Other Factors For Auto Insurance Deductibles

In some cases, you won’t have as much freedom to choose your own deductible. For example, your car insurance company may require you to pay a higher deductible if you are considered a “high risk driver.” If you have had several incidents over the past three years — including traffic accidents, DUI, speeding violations, or reckless driving offenses, then you can bet you’ll be charged a higher deductible on your auto policy.

When To Pay A Deductible

Most auto insurance companies only ask you to pay a deductible in the event of an accident or claim. So you will not need to pay this money  up front when you buy your new auto policy. If you want to buy a particularly comprehensive policy or additional collision coverage, you may need to pay along with your annual premium, although this is rare.

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