How Do Insurance Deductibles Actually Work?

If you’ve ever bought insurance or filed a claim, you’ve certainly heard the term “deductible,” but you might not know what it means or how it works. A deductible is an amount you need to pay out of pocket before your insurance coverage is triggered and starts paying for the peril. The type of deductible you choose depends on the coverage you have.

Auto insurance deductibles are often grouped into two types: collision and comprehensive. A collision deductible is a set dollar amount that you must pay before your insurance company begins paying for repairs or replacement expenses to fix your car. Comprehensive coverage offers protection in case someone else’s negligence causes damage to your car. You’ll pay a deductible for both collision and comprehensive coverage, but you may be able to lower the cost of each by selecting a higher deductible amount.

Your deductible will also impact how much money you have left to repair or replace your vehicle after an accident.

How Much Does an Auto Insurance Deductible Cost?

Each company has its own deductible amount you can choose from, but the average collision and comprehensive deductibles range between 100 to 1000. For collision coverage, the deductible can be over 100. If your car is worth more than $3,000 or less than $250, then it’s a good idea to have both types of coverage in case the worst happens.

You’ll want to choose the company with the lowest deductible amount because it means you’ll have fewer out-of-pocket costs after an accident.

How Does an Auto Insurance Deductible Exactly Work?

An insurance deductible is a fixed amount you pay each time you file an auto insurance claim. This means that it doesn’t matter how much your car is worth or what kind of coverage you have because every time you make a claim on your policy, the same dollar amount will be deducted from your insurance payout and applied to the repair bills.

This method of deducting money from your insurance payout is very similar to how homeowners insurance works. You pay a deductible amount each time you file a claim, and the insurance company pays out the rest of the settlement once it has paid off all of its expenses.

Deductibles for Renters Insurance

A renters insurance deductible functions like a homeowners insurance deductible. It might be a fixed monetary sum, such as $500, or a percentage, such as 2%. A renters’ policy may cover many of the same basic risks as a homeowners policy, such as theft, fire, bodily harm, and loss of use. You are responsible for paying the deductible amount each time you file a claim, and your insurer will cover the remaining balance up to your policy limit.

Deductibles for Health Insurance

Unlike auto, home, or renters insurance deductibles, which you pay for each approved claim, health insurance deductibles relate to a set amount you must spend on medications or services (e.g., hospital bills, surgeries, lab tests, etc.) before your insurer will start paying for them. It is necessary to keep in mind that copays don’t count towards your deductible.

If you have any questions regarding auto insurance deductibles, reach out to our team at ISU Wissink Insurance Agency. We can answer all your questions related to auto insurance and can help you determine a suitable auto insurance deductible as per your unique insurance needs.