When you set up your insurance coverage for your vehicle, you will have to choose what deductible amount you want to be charged. Before choosing the amount for your deductible, it is essential to understand how this type of coverage works.
1. The Deductible Is a Set Amount
The deductible is a set amount that both parties agreed to in advance. The deductible is the amount of money that you are expected to contribute towards a claim. If you get into an accident and have to file a claim, you have to pay your deductible first, and then the insurance company will pick up the remaining value for the claim.
As an example, if you get into an accident, and your vehicle suffers $3,000 worth of damage, and your deductible is $1,000 after you pay the $1,000, your insurance company will pay the remaining $2,000 to fix up your car. You have to take some responsibility for the cost of the claim via your deductible, but not the full cost of the repair.
The deductible amount is established when you create your policy; it is not a number that is figured out when you file a claim.
2. The Deducible Is for Specific Types of Coverage
You don't have to pay a deductible for all the types of coverage on your auto insurance policy. Your deductible is specifically designed for the comprehensive damage and collision damage portions of your policy. Both of these types of coverage specifically involve paying for damages to your vehicle. With both comprehensive and collision coverage, you work together with your insurance company to pay for damage to your vehicle.
3. The Deductible Needs to be Affordable
You get to choose your deductible amount. It is essential to select an amount that you can easily afford if you were to get into an accident. If you cannot pay your deductible, your insurance company isn't going to pick up their share of the bill either. That is why you need to ensure that the deductible amount that you choose for comprehensive and collision coverage is an amount you can easily afford.
4. The Deductible Impacts Insurance Rates
Next, it is essential to understand that your deductible impacts your insurance rate. With your deductible, you are taking on some of the risks of providing you with insurance by agreeing to pay a specific portion of any claim that you file. Generally, the larger deductible you take on, the more a decrease you will see on your premium.
That doesn't mean you should go for the largest deductible possible; you want it to be something you can afford to pay.
Your deductible is the amount of the repair or replacement bill you will have to pick up when you have to file a comprehensive or collision claim with your insurance company. Your deductible needs to be something you can afford to pay, and the amount you choose will impact your overall premium rates.
For more information on deductibles, contact an auto insurance provider.