Auto Insurance DeductibleAn auto insurance deductible is the amount of money you must pay to have your vehicle fixed after an accident. A deductible applies only to comprehensive and collision coverage, as liability insurance pays for the damages you might cause to another driver and not repairs to your own vehicle.
Understanding Your Car Insurance Deductible
Your deductible will vary according to the terms of your policy. You can occasionally find policies with no deductible, but the auto insurance premiums are significantly higher for this type of coverage.
To understand auto insurance deductibles, think of your deductible as your out-of-pocket cost for an accident. If you are in an accident that causes $3,000 of damage to your vehicle and your car insurance policy has a $500 deducible, your insurance company will pay for the remaining $2,500 in repairs. If the accident causes $5,000 of damage, your insurance company will pay for the remaining $4,500.
The company will pay for damages up to the limit of your policy. Regardless of how serious how the accident is, you will only need to pay your auto deductible.
Subrogation and Your Auto Deductible
If you are involved in an accident with another driver and liability is uncertain, you may be advised to file a claim with your insurance company.
Once your auto deductible has been paid and your vehicle has been fixed, the insurance company may decide to pursue subrogation against the negligent driver's insurance policy. If your car insurance company recovers the money they paid for your paid for your claim, they must reimburse you for your deductible.
High Deductible Insurance
If you're on a tight budget, you may be wondering if you can lower your auto insurance payment by increasing your deductible. However, this is one cost-cutting measure that may not always be in your best interests.
It's true that a higher deductible will result in slightly lower monthly car insurance premiums, but you must keep in mind that you will need to pay your deductible fairly quickly after being involved in an auto accident. If you don't have easy access to these funds in your emergency savings, you may have to resort to measures such as a high interest personal loan or a cash advance on your credit card. Both of these options would easily eliminate any money you had saved by changing the deductible on your policy.
It is better to obtain several different auto insurance quotes online to make sure you're getting the best possible price for your current auto policy.