What are Car Insurance Deductibles? – 2024 Guide
Yes, deductibles are something you have to deal with at the time of insurance package purchasing. They cover almost every insurance type. Just as the insurance package differs from one condition to another, deductibles also vary for each situation.
The following read will help you understand auto insurance deductibles.
What Is a Deductible In Car Insurance?
‘Car insurance deductible means the amount that you have to pay at the time of claim before your insurance company pays the remaining amount to recover the loss or damage.’
It basically refers to your financial responsibility for a certain claim related to your vehicle’s damage.
Example
Consider you own a Ferrari and it gets damaged in a car accident. Now if your deductible is $500 and the repair cost is $1,500, then you will first pay the $500. Once you are done with paying, the insurance company will pay the rest $1,000.
2. Types of Car Insurance Deductibles
Deductible in insurance is of four types that include:
2.1. Compulsory Deductible
This is the auto insurance deductible amount that you always have to pay first at the time of claim.
2.2. Voluntary Deductible
It is the amount that a car insurance policyholder agrees to pay before he/she submits the insurance claim. A higher voluntary deductible means the discount is also higher with a minimum insurance premium and vice versa.
2.3. Collision Deductible
This is a type of car insurance deductible that you have to pay in two conditions, i.e., the other driver is not recognizable or you are at fault for any damage in a car accident. It is applicable in case your car hits any other object or car.
2.4. Comprehensive Deductible
This deductible covers certain events besides car accidents, including car theft, vandalism, weather, fire, or animal strike.
3. How Does a Auto Insurance Deductible Work?
Imagine you have a car insurance plan with a $500 deductible amount for collision coverage. This means if you cause an accident and your car needs repairs, you have to pay the first $500 yourself.
Now, let’s say the repairs cost $3,000. You’ll pay your $500 deductible amount directly, and then your insurance company kicks in the remaining $2,500 to cover the repairs.
It is one of the most positive things here which is you can easily fluctuate your car insurance deductibles whenever required. When you choose a higher deductible, then it means you want a lower premium. When you choose lower deductibles, it means you can pay more for your premium.
This decision depends on what is good for you and will benefit you. Pay more yourself after an accident but have a cheaper monthly payment, or pay less yourself but have a more expensive monthly payment.
Remember when you will submit a claim, you are bound to pay your deductible. You can easily adjust your insurance deductibles according to your budget.
How Much Is Car Insurance Deductible?
There are different auto insurance deductibles available. The most important and broadly accepted insurance deductible is $500. Different insurance companies set the deductible at $500 but at the same time, you will see different deductibles including $250, $1,000, or $2,000.
How Do I Choose the Deductible Amount?
For each coverage, you may choose a deductible amount. Here are some factors you must consider:
- Set the dollar amount at first. Because in most cases, at the time of claiming deductible, you will have to pay these deductibles. So here, you are suggested to choose the amount which you can pay easily.
- Remember which deductible amount you choose will have a direct impact on your car insurance premium. If you choose a low deductible amount, then you will pay a high insurance premium and if you choose a high deductible amount, then definitely you will pay a lower insurance premium. You can easily calculate how your deductible affects your policy premium.
Pros and Cons of High Deductibles
When your deductibles are high, it means you pay a high amount before insurance. There are different reasons why they are good or bad sometimes.
Pros
- Choosing a high deductible means the premiums or monthly payments might be lower. This helps to save money monthly.
- Remember, if you don’t visit the doctor often or you drive safely, a high deductible could be good for you. You might not need to use your insurance much, so paying less each month could be a smart choice.
Cons
- Before insurance, if you get in a car accident or fell ill and need treatment, then you must have to pay a high amount for treatment. This process can be tough if you have short savings.
Pros and Cons of Low Deductibles
You pay less in low deductibles before your insurance helps. Here are the good or bad sides of low deductibles because sometimes they prove good and sometimes bad.
Pros
- It helps to get proper health treatment whenever needed.
Cons
- The downside is that lower deductibles usually mean higher monthly payments. If you rarely need medical care or have a clean driving record, you might end up paying more in the long run with a low deductible.
People Also Ask
Do I pay a deductible if I hit a car?
If you are responsible for the car accident but your car is not damaged after a hit, you are not supposed to pay any deductible. But during such a circumstance, your liability insurance will cover the injury of the second person but does not cover the deductible.
Is it better to have a $500 deductible or $1000?
If you have suffered more than one accident and received a DUI in the past 3 years, then a deductible of $50 is better to consider.
Do I need to pay a deductible if I was in a car accident caused by someone else?
No, you typically don’t pay your deductible if someone else caused the accident. The at-fault driver’s insurance should cover the repairs to your car, and you shouldn’t have to pay anything out of pocket besides the deductible if your car needs repairs beyond what their insurance covers.
What Happens If You Can’t Pay Your Car Insurance Deductible?
If you do not pay your auto insurance deductible, you may have to face either of the following three possible situations:
- Some shops may refuse to start repair
- Unlike, some other shops may discuss payment plans with you to start the repair
- Your insurance company can also refuse to pay its contribution until or unless you are not done with paying your portion
Is Car Insurance Tax Deductible?
Yes, of course! If you are a self-employed person and use your vehicle for business purposes, then you are likely to pay tax on your vehicle insurance deductibles.
What is deductible reimbursement?
It is basically a protection product that is designed to cover the deductibles for collisions of a car that you borrow from someone.
