A car insurance deductible is the amount of money you pay out-of-pocket before the insurance company covers the remainder if you’re involved in a covered loss. For example, if you have a covered loss of $3,000 and your policy carries a $1000 deductible, you’ll pay the first $1000 and the company will pay the remaining $2,000. As a rule of thumb, it’s always a good idea to choose a deductible that you can readily cover when you are faced with an unexpected loss. When you purchase an insurance policy, you determine how much you are willing to pay out of your own pocket in the event of a loss. That’s your auto insurance deductible. The higher your deductible, the greater the level of risk you are willing to accept.
How Do Auto Insurance Deductibles Work?
Let’s say that when you purchased your auto insurance policy, you selected a $1500 deductible. Now, you are involved in a car accident, and it’s going to cost $2,500 to repair your car. You are responsible for the first $1,500 in damage repairs, and the insurance company will pay the remaining $1,000. In other words, when you receive your payment check, $1,500 will have been deducted from it. If you have a low auto insurance deductible, then you will have to pay more for your auto insurance premiums upfront. However, in the event of a car accident or some other damage or calamity to your automobile, you will pay less towards your automobile repair bill.
Deductible Affects Insurance Premium
The higher your deductible, the lower your insurance premium. Consequently, the higher the auto insurance premium, the lower your auto insurance deductible, the higher your premium. Why is that? Having a high deductible means you are taking on a greater portion of the risk. Having a low deductible means you are taking on a smaller portion of the risk.
To Save Money on Your Insurance, Watch Your Auto Insurance Deductible
If you want to save money on automobile insurance, raise the auto insurance deductible. Take note, if you do have an automobile accident, you will have to pay more money out of your own pocket to get back on the road. Whether you choose a high deductible or a low one, set aside an emergency fund to cover that amount so you’re prepared when the unexpected happens