We all need car insurance, and car insurance typically comes with a deductible. A car insurance deductible is the amount you pay before the car insurance pays anything on your claim. Typically, the deductible is subtracted out of your claim amount, but if the claim doesn’t reach the deductible, the insurance company doesn’t pay.
Deductible Amounts
Car insurance deductibles can range from $0 to thousands of dollars so it’s important to choose an insurance plan with a deductible you can afford. It may mean choosing a slightly higher deductible in exchange for a lower monthly premium, but it’s important to choose a deductible amount you can always afford. If you can always afford $500, then get a $500 deductible. If you can’t, then get a smaller deductible.
Deductibles And Rates According to Car
Whether the car is new or used can have a huge impact on insurance rates. Car insurance for a new car can be triple the amount for a used car and new cars with loans require comprehensive and collision insurance. The other issue with new car insurance is that with a new car under loan, you are still obligated to pay back the loan whether the car is drivable or not. The car loan does not go away simply because you got into an accident.
On a used car, the car insurance is typically cheaper. This has a lot do to with the age of the car and how you paid for it. If you paid cash for your new car, the only car insurance you need is comprehensive, but comprehensive insurance does not cover car accidents that are deemed your fault. In other words, if you slide off the road and crash into a light pole, you’re responsible for 100 percent of the repairs, but if someone hits you from behind, their insurance is responsible for fixing or paying you the value of your car.
Flexible Deductibles
It’s also important to understand that not all deductibles are flexible. Some are preset by the state you live in and cannot be raised or lowered. In that instance, it’s important to have the money to cover that deductible in the bank.
One type of insurance that many states do not allow any flexibility is uninsured motorists’ coverage. That means if the state has preset that deductible at $500, you owe $500 before your insurance company will repair the car, or you owe that amount to the car repair shop before they’ll give you your car back.
How Deductibles Are Deducted
When choosing a deductible, remember to ask how the deductible will be paid. Some car insurance companies require the deductible up front. Others will deduct the amount from the claim amount. In the instance of a complete loss, it’s typical for the car insurance company to mail a check minus the deductible amount, but in the instance of repairs, the car insurance company may mail a check to the repair shop minus the deductible, which means you owe the repair shop your deductible. In other instance, you might pay the deductible directly to the car insurance company. It’s important to understand how each deductible will be paid, and that’s something you need to ask your insurance agent before you purchase the car insurance.
