Deductibles And Accidents: Understanding Auto Insurance Claims

A car insurance deductible is the amount of money you pay towards a claim before your insurance provider covers the rest. This is sometimes referred to as what you pay out of pocket. The amount of your deductible depends on the type of policy you have and the amount you have agreed to pay. Collision, comprehensive, uninsured motorist, and personal injury protection coverages all typically have a car insurance deductible.

The requirements for deductibles should be outlined in your policy documents. If you are at fault in a crash and have full coverage, you pay the deductible, and your insurance company fixes both cars up to the policy limits. If you are not at fault, you do not have to pay a deductible; the at-fault driver has to pay for their own repairs, but not for yours.

When do I have to pay an auto insurance deductible?

An auto insurance deductible is the amount of money you pay out of pocket on a claim before your insurance covers the rest. You will need to pay your deductible every time you file a claim under a coverage that carries a deductible. This includes comprehensive and collision coverage, which covers damage to your vehicle in a wide variety of situations.

If you are in an accident caused by another driver, their insurance company will usually pay for your repairs if their driver is deemed fully at fault. However, if you want to get your vehicle fixed faster, you can file a claim against your own policy, in which case you will need to pay your deductible. Your insurance company will then negotiate with the other insurance company for reimbursement of the money they paid you. If this process is successful, you will receive a refund of all or part of your deductible, depending on the circumstances of the accident.

You will also need to pay a deductible if you file a comprehensive claim, for example, if your car has been stolen, broken into, or damaged by a falling tree. Comprehensive car insurance covers your vehicle if you are involved in an incident that does not include another driver.

Additionally, if your car's windshield breaks, you will pay the comprehensive coverage deductible, and your car insurance will cover the remainder of the glass repair or replacement. Some insurance companies offer the option to buy a lower glass deductible, which will increase your premium but can lower the deductible on your policy for glass claims.

When choosing your deductible, it is important to select an amount that you can comfortably afford in case you need to file a claim. Car insurance deductibles usually range from $100 to $2,000, with $500 being the most common amount.

Comprehensive and collision coverage

Both comprehensive and collision coverage have deductibles, which is the amount you pay "out of pocket" before your insurance covers the rest. Typically, you can choose your deductible amount, usually ranging from $100 to $2,000. A higher deductible means a lower insurance rate and vice versa. The deductible amount you select will influence your coverage limit, as the maximum payout you can expect will be equal to the actual cash value of your vehicle minus your deductible.

When deciding on your comprehensive and collision deductibles, consider how much you are willing to pay out of pocket if your car is damaged. For example, if you have $500 set aside for vehicle repairs, choosing a deductible of $500 would be appropriate. Additionally, some insurers may require you to purchase comprehensive and collision coverage together, rather than buying collision coverage separately.

Uninsured and underinsured motorist coverage

Uninsured motorist coverage specifically applies when you are hit by a driver with no auto insurance. Underinsured motorist coverage, often offered alongside uninsured motorist coverage, comes into effect when the other driver doesn't have adequate coverage to pay for the damages or injuries they have caused. Both types of coverage are mandatory in many states and highly recommended for all drivers.

In the case of a hit-and-run accident, you can file a claim against your uninsured motorist coverage. However, it's important to note that in some states, uninsured motorist coverage for property damage will not cover these incidents, and you would need collision coverage to cover the damage to your vehicle.

Uninsured motorist coverage for property damage and collision coverage both address damage caused by a driver with insufficient or no insurance. However, collision coverage will only pay for damages to your car, regardless of who is at fault. In contrast, uninsured motorist coverage for property damage may cover damages to your car and other property, depending on your state.

When it comes to choosing a deductible, you can opt for a higher or lower amount. A higher deductible results in a lower insurance rate and higher out-of-pocket costs, while a lower deductible leads to a higher insurance rate but lower out-of-pocket expenses. Ultimately, the choice depends on your preference and driving history, as well as the likelihood of filing a claim.

Personal injury protection

PIP policies have a minimum coverage amount and a per-person maximum coverage limit, which is usually no more than $25,000. The cost for PIP coverage varies with each company, and the number of vehicles on your policy can also affect the price.

In some states, PIP may include a deductible, with a range of deductible amounts available. If you live in a state where PIP is optional, consider purchasing at least the minimum amount of coverage if you don't have health insurance or are on a high-deductible health plan.

It's important to note that PIP doesn't cover expenses unrelated to personal injuries after an accident, such as damage to your vehicle or theft of your vehicle.

What is a good deductible for car insurance?

Choosing a good deductible for car insurance depends on several factors, including your financial situation, the value of your car, and your tolerance for risk. Here are some things to consider when deciding on a car insurance deductible:

• Affordability: A good deductible is one that you can comfortably afford to pay in the event of an accident or unexpected event. While a higher deductible can lead to lower insurance premiums, it's important to ensure that you don't choose a deductible that is beyond your financial means.
• Likelihood of Filing a Claim: If you have a history of car accidents or engage in high-risk driving behaviours, you may be more likely to file a claim. In this case, a lower deductible with a higher premium might be a better option, as it will result in lower out-of-pocket costs when filing a claim.
• Value of Your Car: If your car is not worth much, a lower deductible is generally better. This is because the insurance company will only pay up to the actual cash value of your vehicle if it is declared a total loss. With a high deductible, you may end up paying more out of pocket than the car is worth.
• Cash Savings: If you don't have sufficient savings or an emergency fund to cover a high deductible, opting for a lower deductible with higher monthly premiums might be a more financially prudent decision.
• Risk Tolerance: Choosing a high deductible is essentially a gamble that you won't have a car accident. If you are risk-averse and want to avoid the possibility of a large bill after an accident, a lower deductible might be a better choice.

It's important to remember that there is no one-size-fits-all deductible, and the best deductible for you will depend on your individual circumstances. It's always a good idea to carefully review your financial situation and consider the potential costs and risks associated with different deductible options before making a decision.

Frequently asked questions