How Do Auto Insurance Deductibles Work? 

Understanding how auto insurance deductibles work is essential for all vehicle owners. A deductible is the amount of out-of-pocket expenses you must pay before your insurance coverage kicks in.

It directly impacts your insurance premiums and how much you will be financially responsible for should an accident occur. 

Understanding Deductibles 

When purchasing auto insurance, you select the desired coverage. With some coverage, you agree to pay a set amount, your deductible, towards the repair costs should a physical damage claim arise.

For example, if your deductible is $500 and your vehicle repair costs following an accident are $2,000, you will pay the first $500, and your insurance company may cover $1,500 in accordance with policy terms. 

Although some drivers opt for a $500 deductible, insurers may offer other amounts: deductibles typically range from $100 to $2,000. You may not need to file a claim if your auto deductible exceeds the cost of your vehicle’s repairs. 

Importantly, not all auto insurance claims are subject to a deductible; typically, they’re associated with claims of physical damage to your vehicle. Conversely, liability claims (i.e., damage you cause to others) may be covered by insurance right away.

However, it’s critical to review your specific car insurance policy to understand exactly which claims may require a deductible.  

The Impact on Premiums 

In general, the higher the deductible, the lower your premium. A higher deductible reduces the insurance company’s risk, and they pass on some of those savings to you. Conversely, a lower deductible can mean higher premiums because the insurance company assumes a greater risk. 

Choosing the Right Deductible 

Choosing the right deductible requires careful consideration. A higher deductible may reduce your premiums, but you’ll pay more out-of-pocket expenses should an accident occur. In contrast, a lower deductible may mean higher premiums but fewer out-of-pocket costs after an accident. Consider your financial situation, driving habits and risk tolerance when choosing your deductible. Ensure you have the means to cover the deductible should you make a claim.  

Types of Deductibles and When They Apply 

Deductibles may apply to physical damage coverage, namely collision and comprehensive coverages; however, others may apply depending on selected policy inclusions, such as for uninsured/underinsured motorist coverage. 

Collision deductible —This may apply if your car suffers damage because of a collision with another vehicle or an object.   

Comprehensive deductible —This may apply to noncollision damage such as theft, vandalism or severe weather.  

Auto Insurance in Norcross, GA 

Understanding how auto insurance deductibles work can help you make informed decisions about your coverage.  Fortunately, the team at Vila Financial can help you understand this process; contact us today to review your coverage. 

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.