Car Insurance Deductibles: What Are They & How Do They Work?

A car insurance deductible is the amount of money a policyholder has to pay out-of-pocket towards a car accident claim. It is the amount you have to pay following an accident before your car insurance coverage kicks in.

Unlike health insurance claims, car insurance does not require you to pay an annual deductible. Instead, you have to pay the deductibles on a per claim basis, i.e., every time you file a claim.

In this guide, we will examine the different types of car insurance deductibles and how they work.

Types of Car Insurance Deductibles

There are two types of deductibles you can choose from: low or high deductible.

Choosing a low deductible policy means you have to pay high insurance premiums. Alternatively, selecting a high deductible policy means you will have to pay low insurance premiums.

Furthermore, car insurance deductibles can be paid for several different types of coverages. These include collision, comprehensive, personal injury protection, and uninsured or underinsured motorist.

Collision – It covers your vehicle’s repair in situations where you collide with other objects and are found to be at fault. Such objects can be another vehicle, a wall, a tree, etc.

Comprehensive – This policy covers your vehicle’s repair in situations other than a collision. These include damages from hailstorms and other natural disasters, accidents with animals (such as deers), etc.

Personal injury protection – This policy covers the medical bills for the driver and the passengers in your car during an accident.

Uninsured or underinsured motorist – This policy covers your medical bill for accidents caused by another driver who is either uninsured or inadequately insured (underinsured).

How Do Deductibles Work?

The car insurance deductible is first applied to any of the damages mentioned above. For example, say, your car hits a wall and sustains damages worth $3,000, and you have collision coverage for your car. If you have chosen a deductible of $500 per claim, you first have to pay that amount out-of-pocket, following which your insurer will pay the remaining $2,500.

How to Choose the Right Car Insurance Deductible Amount

When choosing a car insurance deductible, you should think about the amount you can afford to pay out-of-pocket. Take note that car insurance companies sell insurance coverages at a profit. Thus, the more risk protection you buy, the more profit they make and the less deductible you have to pay. This, however, does not mean you should go for a deductible that is above what you can conveniently afford.

Also, consider how often you get involved in car accidents. If it is frequent, we advise you to go for policies with low out-of-pocket payments. This will help you avoid paying lump sums regularly.

Raising your deductibles is an easy way to cut down on your premiums but make sure you have adequate coverage in place. To learn more about car insurance policies or to get started with one, contact our experts at ISU-Wissink Insurance in Culver City, California today! We can help you get comprehensive auto insurance coverage to suit your unique needs.