Auto Destructible Claims: Insurance Payouts And Your Rights

When it comes to auto insurance, policyholders are often required to pay a deductible, which is an out-of-pocket expense, before their insurance company covers the remaining costs of damages. The deductible amount, chosen by the policyholder, is paid for each claim made, and it applies to various types of coverage, including collision and comprehensive insurance. The average deductible is $500, and it can range from $100 to over $2000. A higher deductible leads to lower insurance premiums, but it also means higher out-of-pocket expenses in the event of an accident. Policyholders can choose different deductibles for different types of coverage, depending on their risk assessment and financial situation.

Collision coverage

When purchasing collision coverage, it is common to have a deductible, which is the amount you pay "out of pocket" before your insurance covers the rest. For example, if you have a $500 deductible and $3,000 in damage from a covered accident, your insurer will pay $2,500, and you will be responsible for the remaining $500. The higher the deductible, the lower the insurance rate, and vice versa.

In addition to collision coverage, comprehensive coverage is another important component of auto insurance. While collision insurance covers accidents involving objects or other cars, comprehensive insurance covers a broader range of scenarios, including theft, hitting an animal, natural disasters, and civil disturbances. Together, collision and comprehensive insurance provide comprehensive protection for your vehicle.

Comprehensive coverage

The decision to opt for comprehensive coverage depends on the value of your car, your personal preferences, and your financial circumstances. If your vehicle has a high cash value or you cannot afford to repair or replace it out of pocket, comprehensive coverage could be a smart choice. However, if your vehicle's cash value is relatively low and you have a higher deductible, it may not be worth the additional cost.

Deductibles and premiums

When it comes to car insurance, a deductible is the amount of money you are responsible for paying out of pocket before your insurance company begins to cover costs. This is applicable to every car insurance claim you make. You can save on your monthly premium by choosing a higher deductible, but you will have higher out-of-pocket expenses if you get into an accident.

For example, if you have a $750 deductible and are in an accident where your collision coverage applies, and your car suffered damage requiring $3,500 in repairs, you would be responsible for paying $750. Your insurance company would then cover the remaining $2,750.

In the context of health insurance, a deductible is the amount of money you need to pay each year before your health insurance plan will pay for most types of care. For instance, if your deductible is $2,000 a year, your plan won't pay for any of your care until you've paid $2,000 out of pocket for things like doctor visits, testing, prescriptions, and X-rays. After meeting your deductible, you'll pay a percentage of healthcare expenses known as coinsurance until you reach your out-of-pocket maximum.

A premium, on the other hand, is the amount you pay for your health plan each month, regardless of whether you use any care. Higher premiums usually mean lower deductibles, and the two are inversely related. When one is more affordable, the other tends to be more expensive.

When choosing a health insurance plan, it's essential to consider both your health needs and your financial situation. If you have unique medical concerns or chronic conditions requiring frequent treatment, a lower deductible plan with a higher monthly premium might be preferable. On the other hand, if you're generally healthy and don't anticipate frequent healthcare needs, a plan with a higher deductible and a lower monthly premium may be more suitable.

Subrogation

In most cases, an individual's insurance company will pay their client's claim directly and then seek reimbursement from the other party's insurance company. The insured typically receives prompt payment, and then the insurance company may pursue a subrogation claim against the party at fault for the loss. This process can take weeks, months, or even years to complete, depending on the complexity of the case, state regulations, and other factors.

For example, if an insured driver's car is totalled due to the fault of another driver, the insurance company will reimburse the covered driver and then pursue legal action against the at-fault driver to recover the amount paid out. If successful, the insurance company must divide the amount recovered after expenses proportionately with the insured to repay any deductible paid by the insured.

When to pay

When you file a claim with your insurance company, you pay your deductible, and they cover the remaining costs. For example, if you have an approved claim for $2000 to repair your car and your deductible is $750, your insurance company will send you a check for $1250.

You will have to pay your car insurance deductible if you cause an accident that damages your vehicle and you file a claim using your collision insurance. If you are at fault for an accident and are injured, you will have to pay a Personal Injury Protection (PIP) deductible, too. In most situations where you use your own insurance, you'll need to pay a deductible, sometimes even when you're not at fault.

You may be able to choose to go through your own collision insurance to repair your car while fault is being determined. In this case, you will have to pay your deductible at first, but your insurance company will seek full reimbursement from the at-fault driver's insurer through a subrogation claim.

If you caused your own vehicle's damage, you would either have to pay for the damage yourself or make a claim against your own policy's collision coverage, if you have it. If the damage isn't extensive, you might want to pay out of pocket for repairs because making a claim against your own policy's coverage might raise your car insurance premium, and cost you more money in the long run.

If you can't pay your car insurance deductible, you won't be able to file a car insurance claim to have vehicle damage or medical bills paid for by your insurance company. Instead, you will need to set up a payment plan with a mechanic, take out a loan, or save up until you can afford the deductible.

Frequently asked questions