How Does a Car Insurance Deductible Work? Time To Know

SpinnyWheels

February 8, 2024

Reading Time:- 6 minutes

HOW DOES A CAR INSURANCE DEDUCTIBLE WORK

How does a car insurance deductible work?” It’s a question every car owner has asked at least once in their life. After all, every car owner insures their cars to get rid of deductibles.

Therefore, every car owner first understands the insurance policies, their claiming rights, and deductible amount before the policy. Some insurance policies help owners to avoid deductibles 100%.

However, in other insurance policies, owners must pay some deductible amount before they can claim insurance.

So, which are these policies, and how to avoid higher deductibles? It’s time we let you know everything.

Key Highlights:                                 

  • Apart from some states, companies let you select your own deductibles.
  • You must pay a car insurance deductible for Comprehensive, Collision and Personal Injury insurance.
  • If your deductible is high, your insurance premium will be low, and vice versa.
  • You must pay the deductible to the repairing company and not your insurer.
  • Paying a deductible is necessary only when you file a claim. Otherwise, you don’t have to pay for one.

What Is And How Does a Car Insurance Deductible Work, And Where Do You Have To Pay Deductibles?

Alright, so first we will begin with the WHAT;

What is a car insurance deductible?

A car insurance deductible is what you pay out of your pocket before you claim the rest from your insurer. It is your cost to bear and thus has no relation with your insurer.

Most companies give you the right to select your deductible rate. Moreover, you pay the deductible only when there’s car damage and directly to the repair company, not your insurer.

Now after discussing What is Car Insurance Deductible, Let’s focus on the following:

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How does a car insurance deductible work?

First, If you’re paying a higher premium on your insurance, your deductible amount will get low automatically.

However,  if your premium is low, the deductible will be automatically higher.

Therefore, car owners often buy policies with higher premiums but lower deductibles.

Next, if your deductible limit is higher than the car damage repair cost, owners have to pay the entire amount.

On the contrary, if the damage repair cost exceeds the set deductible limit, you need to cover your deductible.

To understand it  better, let’s take X and Y’s example:

[X and Y both damaged their car in an accident. However, X’s car damage was severe compared to Y’s car. Therefore, the repair amount for X’s car was $4,000.

On the other hand, Y’s car damage wasn’t so severe, so their repair amount was $400. Now, X and Y’s deductible amount was $500, respectively.

Therefore, X only had to pay $500, and their insurance company paid the rest, $3,500. Y had to pay the entire $400 out of their pocket, as their deductible was higher than the repair charges.]

Now that the topic of What and How is over, let’s discuss,

Where You Have to Pay Deductible

Just because there are several car insurances available doesn’t mean you have to pay the deductible for each type of insurance.

Here are some insurance types where you must pay deductibles:

1. Comprehensive Insurance

If you have comprehensive insurance, you must pay an amount as deductible for mishaps other than accidents. These mishaps include flooding, wildfire, Tornado, damage due to landslides, and more.

You can set your deductible rate from $100 to $1000.

Moreover, the coverage you’ll receive = your car’s actual value – The deductible

2. Collision Insurance

As the name suggests, collision insurance covers your expenses when your car gets into an accident. However, if collision insurance, deductible insurance is applicable if your car gets damaged.

In case someone else’s car gets damaged, collision insurance’s deductible will not be applicable there. And it’ll fall under liability insurance.

3. PIP Insurance

If you or anyone else is hurt in a road accident, the PIP insurance or the “No-fault” insurance will come to use. A PIP, like Comprehensive insurance, has a range of deductibles available for customers.

You can select from a range between $100 to $1,000.

But it’s best to check with your insurer before you get Personal Injury Protection Insurance. That’s because, in some states, the highest and lowest range of deductibles differ from other states. Hence, it’s best to check before you buy the policy.

4. Underinsured Motorist Coverage

Uninsured motorist coverages help you when you face an accident that someone else causes but don’t have the insurance to pay for your bills. Underinsured Motorist coverage is just the opposite of Liability insurance, where you need to pay in case someone is hurt by your car.

Deductibles of Underinsured Motorist coverage differ from one state to the other. Therefore, you must check with your insurance company before buying this insurance.

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FAQs

  1. Do I have to pay the entire deductible if I hit a car?

No, in case you hit a car but don’t damage your car, you don’t have to pay deductibles. That said, you must pay Liability Insurance to ensure that the person you hit gets their car fixed properly.

But if the collision also damages your car, you must pay some deductibles. At the same time, the auto insurance company covers the rest.

  1. Do I still have to pay if someone else causes the accident?

You don’t have to pay a penny if someone is at fault and has active liability insurance. However, suppose they don’t have Liability coverage added to their insurance plan. In that case, the money will come from their PIP insurance, and they also have to pay a deductible.

  1. Can You Differentiate Between Deductibles and Premium?

Deductibles are the amount you pay other than the money you claim from your insurance company. And the premium is the amount you keep paying to get good coverage and avoid high deductible rates.

  1. Can I change my Deductible Whenever I want?

For car insurance, you can change your deductible whenever you want. However, it’s better to contact your insurer before you plan on changing your deductible and insurance premium.

Summary

Claiming higher for car insurance isn’t difficult if you know how does a car insurance deductible work. As long as you know the role of deductibles in your insurance, you will know how to deal with it.

With that, I’ll wrap up for today and return with more auto-knowledge next time. Ciao!!

Category: Industry News

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