A car insurance policy is an agreement you enter into with an insurance provider that covers you from financial loss in case of theft or collision. The insurance provider agrees to reimburse your losses as specified in your policy in exchange for you paying a premium. When you file a claim to your insurance service provider, the deductible is first subtracted from your claim cheque before they can cover the rest.
This makes a car insurance deductible the amount of money you pay out of pocket before an insurance company can step in. You can choose between a low and a high deductible in most cases. A low deductible translates to a higher insurance rate, whereas a high deductible translates to a reduced rate.
How Do They Work?
Unlike most insurance covers, a car insurance deductible is not payable annually. Comprehensive and collision coverage are the most known insurance covers with a deductible. Collision insurance cover provides for damages incurred due to an accident with another car, an object, or a pedestrian. Comprehensive insurance covers robbery, arson, vandalism, weather conditions, and animal injuries. Each policy cover has its deductible.
Assuming you have a $300 deductible with your insurance company and your car sustains damages worth $2300, the amount payable to you would be $2000. This is because the insurer will subtract the $300 from your claim. However, you don’t actually pay the deductible to your insurer since it is subtracted directly from your claim.
What if My Deductible is Higher than the Cost of Repairs?
If you have incurred damages worth $500 and your deductible is $1000, the insurer is not liable for any damages. It would also make no sense to file such a claim since insurance providers only cover the cost after paying your deductible.
What Happens When the Accident Was Not My Fault?
When an accident has occurred, and the fault has been established to be that of the other driver, you do not have to pay a deductible. Instead, file a liability claim with the driver’s insurer responsible for the damage. Sometimes the insurer might hold out on giving you the liability claim, or it might take months for the claim to go through.
To save time, many people choose to submit a claim with their insurer, pay their deductible, and have the insurer pay the remaining costs associated with their damages. This doesn’t mean that your deductible will be lost. At this point, your insurer will seek reimbursement for the total cost, including the deductible from the driver’s insurer.
A High vs. A Low Deductible
Purchasing full coverage insurance requires you to select the amount of deductible payable between $100 to $1000. Choosing the deductible amount for you depends on a few factors: your car’s cash value, your budget, and deductible add-ons. A higher deductible means a lower insurance rate, lower premiums, and higher out-of-pocket costs. Therefore, a lower deductible translates to a higher insurance rate, higher premiums, and lower out-of-pocket costs.
Getting in touch with the proper authorities, collecting evidence from the crime scene, and gathering witnesses will help you make your claim to your insurer in case of an accident. It will also help prove whose fault the accident was and help you get better reimbursement for damages caused.