How Do Auto Insurance Deductibles Work?

How Do Auto Insurance Deductibles Work?

When you purchase a car insurance policy, it is important to understand how the claims process works if you are ever in an accident. One of the most important pieces of the claims process is your deductible. Understanding the amount of your deductible and how that will impact your claim, will ensure that you are financially prepared for any accidents. Here are the basics of auto insurance deductibles to help you understand what deductibles you should have and how they will work when you file a claim.


What Are Deductibles?


A car insurance deductible in the amount of money that the car owner will pay out of pocket if there is ever a claim. Deductibles were designed as a way for car owners to share in the cost of the risk as a way to help keep insurance premiums down. The higher your deductible, the lower your premium. However, the higher your deductible, the more you will have to pay out of pocket if there is ever an accident. Deductibles are structured as a flat payment or a percentage rate depending on what policy you choose and the insurance company providing the coverage.


How Do Deductibles Work When There Is A Claim?


Deductibles are paid out of pocket by the car owner when there is a claim before the insurance company pays for the claim. For example, imagine you have $10,000 in property damage with a $500 deductible for your vehicle and you get into an accident that causes $8,000 in damage. In order to receive the value of the policy, you will first pay the $500. Then you will receive $7,500 from your insurance company once approved. You will not receive the payment until the $500 deductible is met.


Do I Always Have To Pay A Deductible?


There are situations where you will not have to pay your deductible before receiving your claim. These situations include:


  • If you are in an accident where the other driver is “at fault”
  • If an individual other than the driver files a claim against liability
  • If you have special coverages like glass replacement


Finally, depending on the state you live in and the insurance company that you work with, you can also purchase a policy where you do not have a deductible.


What Should My Deductible Be?


There are a lot of factors to consider when determining a deductible. However, the biggest factor comes down to cost. You want to examine your budget and see what you can afford. The ideal is to get the lowest deductible possible while also keeping your monthly premium payments low. Working with a knowledgeable insurance agent can help you find the best deal. The agents at Panorama work with a variety of different insurance carriers, so they will evaluate and compare the policies available to help you find the best deal. They’ll also help review the full claims process to make sure that you know what to do if there ever is an accident. Give us a call today to get started.

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