What You Need to Know About Your Auto Insurance Deductible

woman with long brown hair and glasses inspects the scratches on her car while talking on the phone

Are you wondering why you have a deductible on your auto insurance? Curious as to what it is and why it’s there?

An auto insurance deductible is, simply put, an out-of-pocket expense you pay before receiving any money from your insurance company when filing a claim.

What determines this amount varies from driver to driver but oftentimes you can choose the deductible amount you wish to have included in your policy.

When choosing an automobile insurance policy, it’s important to consider how much your deductible will cost and what is included.

If you’re looking to learn more about auto insurance deductible, here’s a guide to what a deductible is and how it works with your vehicle’s insurance policy:

What is an Auto Insurance Deductible?

An auto insurance deductible is the amount of money that you pay when you need to file a claim. Your insurance company will then cover the cost of any damages above that deductible.

These deductibles are included in automobile insurance policies so that you and your insurance company can share responsibility for any risks, meaning that both parties have a stake in all claims made.

The amount you pay depends on your individual policy – what you choose to pay depends on factors such as if you are a new insurer, your driving history, and what type of insurance policy you choose to suit your individual needs.

Deductibles Versus Premiums

When it comes to the cost of your vehicle’s insurance policy, there is a difference between deductibles and premiums.

A premium is the amount of money you pay to your insurance company to keep your policy active. It is generally paid on a monthly or annual basis.

Your deductible is only paid in the event of a claim.

The two go hand-in-hand, however, and the higher you pay on one the lower the other will be. If you increase your deductible, your premiums will be lower – just keep in mind that you will be responsible to pay that deductible to your insurance company should you end up making a claim on your policy.

Types of Deductibles for Auto Insurance

one hand points to car accident while another hands fills out an insurance form

When it comes to the deductibles included in your vehicle’s insurance policy, there are two types: Collision and Comprehensive.

If you have collision insurance for your vehicle and have been involved in an accident where your car requires a repair, the deductible you pay will depend on whether or not you are at fault and responsible for the accident.

When you are 100% responsible for the accident, you are required to pay the full amount of the deductible. If you are deemed only 50% responsible, you only pay half of the deductible.

If you’re not at fault in a collision, no-fault insurance comes into play. Your insurance company will deal with the at-fault driver’s insurance company for the payout and you will not have to pay a deductible.

Comprehensive insurance covers all other repairs or replacements that do not result from a collision such as theft and damage. In these cases, you always pay the full deductible.

How Much Should I Pay for a Deductible?

Your insurance broker will make a determination or suggestion as to how much of a deductible you should pay. You may be in a position to increase or decrease that amount but there are factors you should take into consideration:

  • Can you afford it? If you need to make a claim and pay the deductible, will this affect your finances negatively?
  • How much will you save on your premium if you increase your deductible? It is worth the lower monthly or yearly cost?
  • Are you willing to increase your risk tolerance to save on insurance costs? 

Depending on your insurer, you can usually choose a deductible between  $250 and $2,000.

Overall, if you have the power to choose your deductible, it is ultimately a financial decision. Make sure you can pay the higher deductible if you need to make a claim.

Should your financial situation change, you can adjust your deductible when you renew your insurance.

Does a Deductible Apply if I have Accident Forgiveness Insurance?

Accident forgiveness is an add-on to your car insurance policy that, if purchased ahead of a collision, will protect your premiums from increasing after an at-fault claim.

This applies to your first at-fault accident claim on your policy and costs about $100 a year.

However, even if you have accident forgiveness insurance, you still have to pay your deductible.

Want to know more about accident forgiveness? Get in touch with one of our brokers at Capital Insurance for more information!

Should I Use My Insurance Deductible or Just Pay For the Damages Out of Pocket?

You may find yourself in a situation where it would be more affordable to pay for damages yourself than file a claim. 

For example, if you get into an accident and have $300 worth of damages and a $250 deductible, it is definitely worth paying it yourself instead of filing with your insurance company and having them pay the extra $50.

This is because, when you file, you are responsible for paying the deductible and filing can potentially increase your payments when your insurance policy is renewed.

Auto Insurance Deductibles

Understanding how your auto insurance deductibles work is important in making smart financial decisions when it comes to your policy. Paying a higher deductible can lower your premium, but you need to be prepared to pay the deductible should you need to make a claim.

Auto insurance policies are not one-size-fits-all, which is why our brokers at Capital Insurance are dedicated to balancing your car insurance deductible and premium in a way that meets your unique needs.

We can help you take your financial situation into consideration and find the perfect auto insurance policy that makes sense to you.

Ready to get started? Let’s get in touch today!

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