Understanding Your Auto Insurance Deductible
Selecting the right auto insurance policy with the appropriate deductible is an easy task once you know a few basic terms and facts. Many drivers are not aware that the requirements of an insurance policy are dictated by the state in which they are sold. You need to familiarize yourself with what those requirements are in your state. Let’s break it down:
What is a deductible?
A deductible is the prearranged portion of damages that you agree to pay before your insurance carrier will pay the balance of an approved claim. You usually don’t have to pay the deductible upfront, as it is deducted from the repayment check issued by your carrier. This means you will pay the deductible amount upon completion of repairs.
That said, deductible amounts vary based on the individual components that make up your overall policy. Here’s the breakdown:
Collision Insurance
As the name implies, collision insurance protects you in the event of a car accident regardless of who’s at fault. Collision insurance typically requires a deductible amount ranging from $100 to $1,000. In some cases, the deductible may be higher.
Personal Injury Protection (PIP)
If you or your passengers are injured in an accident, PIP is the part of your auto insurance policy that will help to cover the resulting medical bills. PIP requires a deductible amount that can vary from $100 to $2,500 on average. PIP is required in some states, be sure to check your state’s requirements.
Uninsured Motorist Property Damage Protection
If your vehicle or other property is damaged by an uninsured motorist, this coverage will help to repay your loss on an approved claim. This protection does require a deductible that ranges from $100 – $2,000.
Uninsured Motorist Bodily Injury Coverage
This coverage exists to assist you for your medical costs if you are injured in an accident with an uninsured motorist or one who doesn’t have enough coverage to pay your medical bills. There is no deductible for this insurance coverage.
Comprehensive Insurance
This type of insurance coverage envelops the many other causes of damage to your car. Fire, flood, hail, vandalism, or falling objects can be covered by comprehensive insurance. Deductibles range from $100 to $1,000 as a rule. In some policies, there is no deductible for windshield damage.
Can deductible amounts change?
Insurance carriers offer deductibles at different levels that correlate to the premium paid for the policy. If you agree to pay a larger deductible, your premium will decrease. Making this choice relies on your personal preference. Do you want to pay a higher amount out of pocket (deductible) when an event occurs paying less monthly premium, or, would you rather pay a larger monthly premium and less out of pocket when an accident happens? Consider the following before deciding which is best for you:
- Add up all the deductible amounts that you would be responsible for at the time of an accident. Can you afford it?
- How much will a larger deductible decrease your monthly premium payment?
- What is your vehicle’s current value?
- If you are paying a loan or leasing your car, do either have specified requirements for the deductibles?
- How much are you budgeting for your monthly auto insurance premiums?
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