What are Insurance Deductibles?

An insurance deductible is a strategy by auto insurance providers of sharing the risk of an accident or damage to your automobile with you. It is an appropriate way of ensuring that you take the ultimate care of your vehicle since you are aware of what it will cost you. Hence, payment of deductibles ensures you also take partial responsibility for your actions.

Typically, deductibles apply to the properties you possess like a vehicle, but not to cover for liabilities like damage of a property or medical expenses to a third party whereby the policy provider caters for the cost fully so long as it does not exceed the specified coverage limit.

So what exactly are deductibles?

Insurance deductible refers to the sum you cough from your pockets whenever claiming for compensation of your car from a specific auto insurance provider. Deductibles differ from one state to the other with regards to their laws and also the insuring companies, but commonly they range from 250.00 dollars to 1,000.00 dollars.

For instance, supposing your deductible is 750.00 dollars and you are making a claim of 3,250.00 dollars to cover the vehicle’s repair cost, your coverage company will pay 3250.00 dollars less 750.00 dollars which will be 2,500.00 dollars so long as it does not exceed the cover limit.

How do your deductibles relate to premiums?

Commonly, lower deductibles mean higher monthly contributions to the policy company. However, it is an advantage to you in that, in case you raise any claim, the insurer will pay more, and you pay less. On the other hand, higher deductibles mean your premiums will be less, but you will have to pay more in case of any claim you make.

It is advisable to you not to opt for the higher deductibles for the main reason of contributing minimized premiums since it is likely to drain your pockets whenever the need arises.

 

How do you decide which is the appropriate deductible for you?

To make a sound decision, you need to consider the following factors:

 

Availability of funds when an incident arises

You need to consider your savings or emergency funds available and what impact it will have on your financial status.

 

Value of the car 

While cars of high value mean you spend much on coverage premiums and to save that you need to go for higher deductibles, cheaper ones incur low coverage costs and therefore you can consider lower deductibles since repair costs might not be equivalent to higher ones.

 

Frequency of accidents

In case you are prone to causing accidents now and then, it will be wise of you to go for the lower deductibles. Although, if you are disciplined on the roads and have minimal chances of causing accidents, then higher deductibles is the thing for you.

 

The associated savings

Does making lower premiums save you more in case of higher deductibles? And, would the savings be enough to surpass that deductible when a need arises?

 

Ability to hold both higher and lower deductibles

You can balance the expenses if you have lower deductibles for comprehensive coverage which is bound to highly cater to “Godly actions” or unanticipated cases as well as having higher ones for collision coverage.

In case you are short of funds for an emergency you can go for low deductibles, and again if you trust your driving skills and less prone to causing accidents, opt for high deductibles. However, you do not have to raise deductibles simply because you are not in a position to make the monthly contributions which might seem high.