Jane Dotson
An auto insurance deductible is the amount of money you pay towards repairs before your insurance covers the rest. For example, if you have a $500 deductible and $3000 in damage from an accident, your insurer will pay $2500, and you'll be responsible for the remaining $500. You can usually choose between a low and high deductible, with a low deductible meaning a higher insurance rate and vice versa.
What You'll Learn
Choosing a deductible amount
Choosing a car insurance deductible amount involves several considerations. Firstly, you should opt for a deductible that you can afford to pay in the event of a claim. This involves evaluating your income, budget, savings, and available credit. Secondly, it's important to understand the relationship between the deductible amount and your insurance premium. Typically, a higher deductible results in a lower premium, while a lower deductible leads to a higher premium. This means that with a higher deductible, you assume more financial risk by paying more out of pocket if you file a claim, but your ongoing insurance costs are reduced. On the other hand, a lower deductible means you pay less out of pocket in the event of a claim, but your insurance premiums will be higher.
When selecting a deductible amount, it's essential to consider your financial situation and comfort level with risk. If you choose a higher deductible to save on premiums, ensure that you have the financial means to cover the deductible amount if needed. Additionally, take into account your driving record. If you have a clean driving record, a higher deductible may be a good option to lower your premiums. Conversely, if your driving record is less than perfect, opting for a lower deductible, despite the higher premiums, may be more suitable.
It's worth noting that the impact of the deductible amount on your premium varies across insurance companies and states. Therefore, it's advisable to compare different insurance providers and understand the specific regulations in your state. Additionally, consider the type of coverage you have, as some coverages, such as comprehensive and collision, may allow you to choose different deductible amounts. Ultimately, the decision comes down to your financial capabilities and your tolerance for risk.
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Comprehensive coverage
The comprehensive deductible is the amount you agree to pay to repair or replace your vehicle when you file an approved comprehensive claim. The deductible is subtracted from your claim payment for a covered accident. Typically, comprehensive deductibles range from $100 to $2,500, as car insurance deductible choices vary depending on your state laws and insurance company guidelines. The deductible is paid per incident, so you will pay for every comprehensive auto insurance claim you make.
The higher the deductible, the lower your premium costs for an insurance plan. Generally, a higher deductible results in a lower premium, while a lower deductible raises it. If you want to save money on car insurance, consider increasing your deductible from $500 to $1,500.
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Collision coverage
When you make a claim, your collision deductible is the amount you've agreed to pay before your insurance company starts paying for damages. This is sometimes referred to as your out-of-pocket cost. The deductible is subtracted from the claim payout, as it represents the amount you'll pay to repair or replace your vehicle. For example, if you need $1,200 in repairs and your deductible is $200, your insurance company will issue a payout of $1,000.
The amount you choose for your collision deductible will depend on your financial situation and your driving habits. A lower deductible means a higher insurance rate, so you'll pay more on your insurance but will have lower out-of-pocket costs if you need to make a claim. A higher deductible means a lower insurance rate, so you'll pay less on your insurance but will face higher costs if you need to make a claim.
When deciding on your collision deductible, consider how much you could afford to pay out of pocket if you were in an accident, and how likely you think it is that you will be involved in a collision.
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Personal injury protection
PIP typically covers medical expenses, lost wages, rehabilitation costs, and replacement services for tasks that the injured person can no longer perform due to their injuries, such as childcare or house cleaning. It may also include funeral expenses and survivor benefits in the unfortunate event of a fatality.
The availability and requirements for PIP vary across different states. It is mandatory in some states, particularly those with no-fault insurance laws, while being optional in others. In no-fault states, each driver must file a claim with their insurance company after an accident, regardless of who caused it, and PIP coverage becomes essential.
The coverage limits for PIP vary as well, with minimum and maximum amounts set by state governments and insurance companies, respectively. For example, in Florida, a minimum PIP policy of $10,000 is required, while in other states, the minimum coverage may differ. It's important to note that PIP has a per-person maximum, meaning there is a limit to the coverage provided per person if multiple individuals are injured in a single accident.
While PIP covers a range of expenses, it's important to understand its limitations. PIP does not cover bodily injuries to other drivers and their passengers, nor does it cover injuries sustained while committing a crime or driving for work purposes. Additionally, it does not cover damage to another person's property or your own vehicle.
When purchasing auto insurance, it's essential to carefully review the PIP coverage offered and understand the specific requirements and limitations in your state.
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Underinsured/uninsured motorist coverage
Uninsured motorist coverage (UM) protects you and your passengers from bodily injury caused by a driver with no liability coverage. This type of coverage may also include uninsured motorist property damage (UMPD), which covers the cost of repairs to your vehicle. In some states, a deductible may be required for UMPD.
Underinsured motorist coverage (UIM) protects you and your passengers if you're in an accident caused by a driver whose insurance coverage is insufficient to pay for the injuries or damages caused. This type of coverage may also include underinsured motorist property damage (UIMPD), which covers the cost of repairs to your vehicle. Similar to UMPD, some states may require a deductible for UIMPD.
It's important to note that even if you have health insurance, underinsured/uninsured motorist coverage can still provide additional benefits. For example, it may cover lost wages and other types of damages that may not be protected under your health insurance plan.
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Frequently asked questions
A car insurance deductible is the amount of money you have to pay toward repairs before your insurance covers the rest.
You pay your deductible every time you file a claim under a coverage that carries a deductible. Once you pay the deductible amount, your insurer will cover the remaining cost to repair or replace your vehicle.
You can choose your deductible amount when you purchase your policy. It's important to select a deductible that you can afford. A higher deductible will lower your insurance premium, but you'll pay more out of pocket if you file a claim.
You have to pay your deductible every time you file a claim that uses a specific coverage type. For example, if you have comprehensive and collision coverage, you will have to pay your deductible for repairs to your vehicle.
There is no one-size-fits-all answer. It depends on your financial situation and how much you can afford to pay out of pocket if you get into an accident. A higher deductible means a lower premium, but you need to ensure you can cover the cost in the event of a claim.
