One of the terms that confuse many insured parties is deductibles. Before your insurance provider settles your claim, there is an expense you have to pay. Most auto insurance policies have deductibles. These include comprehensive, collision, personal injury protection, and uninsured motorist. The following is some basic information on deductibles.
When Should You Pay an Insurance Deductible?
You should pay a deductible if you file a claim under coverage that requires a deductible. If your deductible is more than the cost of the damage, you will not get any compensation from the insurance company.
There is no need to issue your insurance company the deductible. Typically, your insurance provider subtracts the deductible amount from your total claim's payout. For example, if your approved claim payout is $10,000 and your deductible is $1,000, your insurance company will pay you $9,000.
Increasing Your Deductibles Lowers Your Insurance Expenses
Raising your deductible reduces your monthly premiums. This enables you to contract extra coverage that improves safety without spending a lot.
Choose a low deductible if you aren't financially able to foot significant out-of-pocket expenses. The drawback is that you will have to pay high monthly premiums. When choosing between high and low deductibles, think about your risk potential. If there is an increased risk of being involved in an accident, you are better off with low deductibles.
How to Choose a Deductible
Choosing your deductible will depend on your specific circumstances. Some of the factors you should consider include your vehicle's value, your ability to bear an emergency financial loss, and the effect of deductibles on your premium.
First, determine the value of your car against the expenses for potential repairs. The lower the car's worth, the higher the chance of a total loss. This means it may not be worth purchasing optional coverages.
While paying high deductibles will help you save on monthly premiums, you must review your financial situation. If you cannot come up with emergency funds after an accident, you are better off with a lower deductible.
Lastly, choose different deductibles for different coverages depending on your risk assessment. For example, you may choose a lower deductible for comprehensive than collision insurance. This is because comprehensive coverage is cheaper than collision. Also, you may be more likely to be involved in a collision accident. Therefore, it may be best to choose a higher deductible for collision coverage.
When choosing a deductible, make sure you consult your car insurance agent. Additionally, ensure you familiarize yourself with deductible calculations before purchasing an auto insurance policy.