When getting any kind of insurance, it’s useful to be aware of all the terms and conditions of your contract. The deductible is one of the terms you need to be familiar with to know what to expect in case you need to make a claim on your insurance. Here is what you need to know about your auto insurance deductible.
What is a deductible?
The insurance deductible is the amount of money you will need to pay when making an insurance claim, before being eligible to receive the insurance coverage. Having car insurance doesn’t mean that if something happens to your car the insurance company will cover all the costs of repairing. You will need to pay up to a certain amount after which your insurance will start paying to cover the full cost or up to the policy limit.
For example, if you hit a fence with your car and you need to repair the damage, depending on the type of collision coverage you have, you may need to pay a part of the cost for repairing it. If your deductible is $500 and the cost of the repair is $1200, you will need to pay $500 while the insurance will pay $700.
How much is the deductible and who decides it?
Generally, insurances, and therefore deductibles, are regulated by state and can vary. However, the amount of the deductible, within state limits, can be decided by the buyer. When you choose your insurance you decide on the deductible. Of course, the amount of the deductible, as well as other contractual terms, influence how much you will pay as a premium.
Generally speaking, the lower your deductible, the higher your insurance premium and vice versa. This means that if you wish to pay less premium, you can choose to have a higher deductible. This may be a good way to save money on your premium but in case of a claim, you need to be prepared to pay more.
Can I get insurance without a deductible?
Depending on your insurance company, you may have the option of a zero deductible or a disappearing deductible, that decreases as the amount of the loss increases until it disappears entirely when the loss reaches a certain amount.
Make sure to check with your insurance company if any of these options are available. Some companies have a minimum deductible which means you can’t ask for a lower deductible than the set amount.
If you do find a zero-deductible coverage or a waiver deductible, you will generally need to pay a no-deductible fee, which will increase your premium. For auto insurance, a collision deductible waiver (or CDW) is common.
When choosing your car insurance, make sure to check all the coverage options and understand the contractual terms to avoid having to pay fees that you weren’t aware of.