Car Insurance Deductibles
As consumers begin the search for a suitable auto insurance policy, they must determine how much they are willing to spend on auto insurance. Eventually, they will need to select a deductible, which is the amount they must pay in case of a loss before their insurance policy kicks in. Deductibles represent the shared risk between an insurance provider and policyholder. Generally speaking, the deductible is either a specified dollar amount or a percentage of the claim amount. Consumers who select a higher deductible will pay less in premiums for an insurance policy.
Deductibles vary by state, but most insurance companies offer deductibles in amounts of $100, $250, $500 or $1,000. Consumers should also note that they will have to pay the deductible for each and every situation in which you require your insurance company to cover damages. You must decide how much you are willing and able to pay, as well as how often you think you will need to make an insurance claim.
An inverse relationship exists between deductibles and premiums because consumers with low premiums will have to pay more out of pocket in the event that they do file a claim. Conversely, individuals who opt for a higher premium will pay less when they file an insured claim. One of the best ways to save money on a car insurance policy is to raise your deductible. For instance, raising your deductible from $200 to $500 can decrease your premium cost by 15 to 30%, according to the Insurance Information Institute. As an example, if you have a $500 dollar deductible and your insurance company determines that your loss is worth $2,000, you would receive a check for $1,500. However, if you file a claim and the insurance company determines that your loss is $300, you will pay the deductible, but not receive any money from the insurance company.
You are responsible for the deductible amount. If you do opt for a higher deductible, make sure that you can afford to pay the cost of damages in the event you file a claim.