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Taking the Stress Out of Deductibles: The Simple Truth

July 25, 2013

Insurance DeductibleAn insurance deductible is one of the things people worry about most on their car insurance policy. The main concern is that they will have to pay a lot of money out of pocket every time they have a claim, and that leads to a desire to get deductibles as low as possible – which often means higher insurance rates. Most of the concern about deductibles is due to a lack of understanding about how they work; getting some clarification about your deductible can put your mind at ease.

Why Does an Insurance Deductible Exist?

The main reason insurance companies have deductibles is to avoid small claims that will take up more resources than they are really worth. Imagine the workload on the insurance company if every door ding and scratch became a claim; that is what could happen without deductibles.

The deductible allows insurance companies to keep their rates lower for everyone by having a small portion of certain claims paid by the insured. It saves the insurance company a lot of money and time, and in the end it saves you money too.

When Does an Insurance Deductible Apply?

A lot of the confusion about deductibles revolves around when they apply. Many people worry that they will have to pay a deductible on any claim they make – not necessarily so.

There are a few possible deductibles on a car insurance policy. The most common are your collision and/or comprehensive deductibles. You will pay the collision deductible if you are found to be at fault in an accident. That means that if the other driver is 100% at fault, you won’t see the deductible and your repairs will be fully covered. The exception to this may be a hit and run accident. This is because there is no other driver to take responsibility. It’s also to prevent drivers from making hit and run claims on damage they did to their own car.

The comprehensive deductible applies in any incident that is not a collision, like theft and vandalism. It applies in nearly every claim against this coverage.

How High Should My Insurance Deductible Be?

One of the biggest insider tips regarding deductibles is that with most insurance companies, you can actually have two different deductibles, one for each coverage,. That means you can carry a higher deductible on your collision and a lower one on your comprehensive. Here’s why you may want to do that.

Collision insurance coverage is much more expensive, and you are much more likely to have a very high-cost claim against this coverage. The higher your deductible, the more the insurance company will lower your rate in return for you taking on some of the risk. Comprehensive coverage generally costs less, so there may be less benefit to increasing the deductible. That means you can carry a lower deductible on the coverage you are more likely to have to pay it for.

What If I Have To Pay It?

The biggest concern most people have about a deductible is that they don’t have enough money to pay it out of pocket. It’s a valid concern, and in some situations will have to be dealt with. In most cases the deductible is simply taken out of the amount of money the insurance company pays out, either to you for a totaled car or to the repair shop. In the case of repairs, you will have to pay the remainder of the bill.

Fortunately, there are plenty of repair shops that will work with you on the deductible to make it easier to pay. You can choose where you want repairs to be done, so shop around for a place that will help you out with the deductible.

The Insurance Savings Adds Up

Carrying a higher deductible can be worrisome, but odds are that if you’re a good, safe driver, you won’t need to pay it. The longer you go without paying it, the more money you save. Once you’ve save on premiums the amount you might have paid on a higher deductible, you start to find yourself ahead of the game.

Deductibles are really straightforward when you understand them, and they are one of the ways you can keep car insurance quotes down. Take the stress out of them by focusing on the savings, and driving safe so you don’t have to worry about it.

Speak with your insurance professional to find out what deductible will be the best for you.