Some insurance terms can be puzzling especially in car insurance. After all, not all of them are used in everyday life. As you shop for insurance or compare policies, it’s important to know these terms.
One of these common insurance terms is “the deductible.”
The deductible refers to the part of a claim that the insured party (or the responsible party in an accident) is responsible for paying before any payment from the insurance company begins.
If, for example, you have a car insurance policy with a $500 deductible and are in an accident, you will be responsible for paying the first $500 of damages. If the damage costs $1,000 to repair, you will pay $500 and the insurance company will pay $500.
If the damage costs $3,000, you will pay the first $500 of damages as well, because that’s the deductible. The insurance company is responsible for the other $2,500.
Deductibles vary depending on the policy and the company. The insured can generally choose from several options for the deductible, ranging from several hundred dollars to several thousand dollars.
Deductibles as a Financial Management Tool
Deductibles are important to understand because they help you understand what an accident or other claim will cost you out of pocket. It is an aid to good management of your finances.
It is also important to understand because the amount of the deductible on a given policy can change the premiums you will pay. (Premiums are the payments you make to have an insurance policy.) For example, if you have comprehensive auto insurance for $100,000 with a $1,500 deductible, you may be charged less for your annual premiums than if the same policy has a $500 deductible. The reason is that you will pay more out of pocket in the event of a claim.
If you are looking to pay less on your premiums, it may help to adjust the deductible upward.
If you would to like to discuss your options for car insurance please call us at 561-732-9305 our quoting hours are Monday through Friday from 8:30 AM to 5:30 PM. In addition, you can request a quote online. Please remember, We Handle All the Work, While You Save!
Rob Macoviak is the President of Oyer, Macoviak and Associates. Oyer, Macoviak and Associates is the oldest independent insurance agency in Boynton Beach and has been in business since 1953.