An Overview of Deductibles and How They Can Help Save You (or Cost You) Money After An Auto Insurance Claim2016-08-10T08:39:00-04:00

When you get ready to file an auto insurance claim, you’ll probably be pulling out your insurance policy in order to determine how much your deductible is, along with a host of other coverages your policy provides. When you shop around for car insurance, you may not be paying much attention to the coverage you buy, only really looking for the details when your car needs to be brought in for repair after an accident. One of the biggest details you should concern yourself with when purchasing insurance is your deductible, and today we’d like to take some time to help you understand your deductible, along with weighing the advantages and disadvantages of a low and high deductible.

Your Auto Insurance Policy Deductible

Choosing the deductible on your car insurance policy can be a difficult decision when you don’t understand what advantages and disadvantages of a high or low deductible bring. You can make an informed decision when you weigh the pros and cons of the options before you, and you’ll understand what to expect when you need to initiate an auto insurance claim.

The Deductible

To better understand your options, we’ll start by defining what a deductible is. The deductible is the amount that is “deducted” from your loss, or, the amount you will pay out of pocket before the insurance company pays the rest. However, deductibles don’t apply to every portion of your insurance coverage. For example, the liability portion of your insurance does not have a deductible. Auto insurance coverages that do have deductibles include collision and comprehensive coverage.

Choosing High Deductibles for Collision and Comprehensive Coverage

The higher your deductible, the more money you’ll save on your insurance policy premium. However, this also means your out-of-pocket costs will increase. When your vehicle is damaged by a covered hazard, you’ll have to pay more money up front before your insurance policy covers the rest.

While a higher deductible does help to lower your monthly policy premium, you should realize that it may not save you as much money overall as you think. If you experienced a loss that costs less to repair than the cost of paying your deductible, it does not make much sense to submit the claim to your insurance company. Instead, it’s wise to just pay the bill yourself. If your deductible amount is lower than the cost of repairs, you’d want to submit the claim to your insurance company to have the difference between the repair amount and your deductible paid by the insurance company.

When you choose to pay more out-of-pocket when you suffer a loss and then pay losses that are smaller than the cost of your deductible, then you’re really not saving money.

Advantages and Disadvantages of a Low Deductible

As stated above, choosing a low deductible does have some benefits, including:

  • Smaller out-of-pocket costs for covered claims
  • A better chance the cost of repairing your car will cost more than your deductible
  • Peace of mind knowing you won’t need to come up with a large out-of-pocket expense to cover your deductible to cover your claim when a loss occurs

The disadvantage to having a lower deductible is the fact your auto insurance premiums will be higher. The best thing you can do for yourself is to sit down with your insurance agent to come up with a happy medium. There are many other discounts that could be available to you to help offset the higher premium when you select a low deductible. Consider combining your homeowner’s policy, or look into discounts for driving habits or good grades, if you’re a student. Contact our office today for more information.

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