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January 25, 2021

Auto Insurance Deductibles Explained

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Many insurance customers have questions about what an insurance deductible is. Your insurance deductible is the amount of money that you must pay out of pocket in the event of an accident or claim. For example, if you have a $250 deductible, you will only be responsible for paying $250 towards the damages done in the accident and your insurance company will handle the rest. Most insurance companies give you the option to choose $250, $500, or $1,000 deductibles if you opt for full coverage. It is important to assess the value of your vehicle before choosing your deductible. For vehicles valued at a higher dollar amount, a higher deductible may be okay. However, if your vehicle is valued at lower price, a lower deductible may be needed for a payout. For example, if your vehicle is valued at $35,000 and you have a $1,000 deductible, then you will receive $34,000 from the insurance company if you total your vehicle. On the other hand, if your vehicle is valued at $800 and you have a $1,000 deductible, then the insurance company will not pay anything and you would be responsible for the damages.

One thing to consider when choosing your deductible amount is the cost. Lower insurance deductibles will make your payment amounts higher, while higher deductibles will make your payments lower. If you are making payments on your vehicle to a bank or finance company, they may require you to have a certain deductible for that vehicle. Be sure to talk to your finance company to determine what their deductible requirements are.

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