Deductible Insurance

A deductible is the portion of the claim you pay before your car insurance company pays the rest. However, there are complexities you should know.

When you’re filing an insurance claim, you pay a deductible. This is the portion of the claim that you’re responsible for based on the value of what you’re insuring. The amount of your deductible influences the cost of your insurance.

If you’re in an at-fault or partially at-fault accident, you’ll have to pay your deductible. If the other driver is found to be at-fault, you won’t have to pay it because it falls on the at-fault driver’s insurance.

Although you probably wish you didn’t have to pay a deductible at all, they’re put in place to keep the price of your insurance down. If we didn’t have them, there would be more small claims, which would increase everyone’s premiums. They allow you and the insurance company to share the responsibility of any risks, and so that both parties have a stake in all claims made. Plus, deductibles act as an extra incentive for you to take good care of your home and car. 

Here are a few ways deductibles help you save money over the long-term:

• Deductibles help prevent fraudulent claims and reckless behavior. If insurance policies didn’t have deductibles, some people could be tempted to damage their car or act recklessly because they know their insurer will protect them. This becomes less tempting when people know part of the bill will come out of their pocket. Over time, false claim payouts can lead to higher premiums. 
• Deductibles help prevent minor claims.  Imagine if you didn’t have to pay a deductible. Insurance companies would have to process every claim – including every time someone finds a tiny scratch on their car. When you set your deductible, you’re agreeing to fully cover smaller claims and a portion of those larger claims. 

Note: Your insurance company won’t let you put in a claim for something less than your deductible.

If you chose a lower deductible, your premiums are higher, but you pay less in the event of a claim. On the other hand, if you choose a higher deductible, your premiums are lower, but you’ll pay more in the event of a claim.

The best way to figure out if your deductible is right for you is to ask yourself one simple question: Would you be comfortable paying that amount out of pocket if you made a claim today? If you choose a lower deductible, you’ll be responsible for paying less of the bill if you make a claim. But, the lower your deductible, the higher your insurance premium is. On the other hand, if you choose a higher deductible, the cost of your insurance will likely be lower.

For example, your car insurance policy says that your deductible is $0 when an accident isn’t your fault and $500 when it is your fault. You get in a fender-bender and your insurer determines the accident was the other driver’s fault, so you pay $0. In this same situation, if your insurer determines that you and the other driver are equally at-fault, you may only have to pay 50%. In this case, you’d pay $250. But, if your insurer determines the accident is entirely your fault, you’d have to pay $500. You’ll also need to pay your deductible when the fault is negligible. For example, if a tree falls on your car and you file a claim through your comprehensive coverage. You’ll still have to pay it even though you technically weren’t at fault.