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Car Insurance Deductibles: What Are They and How Do They Work?

What Is A Deductible?

In most cases, an insurance company will not cover the entire bill after a car accident. A car insurance deductible is a previously chosen price that you pay to cover a portion of the costs.

How Does A Deductible Work?

In the case of an accident, you and the insurance company will both pay pieces of the cost. You’ll pay your deductible price and the insurance policy will cover the rest. For instance, say that you chose a $500 deductible and there are $1500 in damage from a car accident. You would pay $500 and the insurance company would pay $1000. Insurance will not cover their end of the cost until you pay your deductible.

It’s also good to know that insurance will only kick in if the overall damage cost is higher than your car insurance deductible. This means that if your deductible is $1000 and you encounter $800 in damage, you would cover the entire $800. Also, if your car is totaled, your insurer will pay you your car’s value, minus your deductible.

Does Every Accident Involve a Deductible?

If you have had the bad luck of being involved in a car accident recently you probably had to dig out your checkbook to pay the body shop for your share of the repair. While your insurer will cover the majority of the damages, you are still responsible for the car insurance deductible. You may have found yourself wondering if any accidents are deductible free, well here is a quick rundown or what type of accidents involve a deductible and the very few that don’t.

 Liability is Free of Deductibles

Liability claims are free from a deductible. If someone hits your vehicle and damages it you would be making a claim against their liability coverage and there would not be a deductible due for either you or the other driver. If the insurer finds their covered driver completely at fault you vehicle will be repaired at no cost to you.

The same can be said if you hit another driver and damage their vehicle. Your liability coverage will cover the cost of repairs to the vehicle you hit and a deducible will not be due by you or the other driver. If you are completely at fault though, getting your vehicle repaired will not be deductible free.

If you are driving an older, low value vehicle, only carrying liability coverage is often a good idea and ensures a deductible free life.

Full Coverage is Different

If on the other hand you are making a claim on your physical damage coverages such as comprehensive and collision you will be paying a deductible regardless of whether you are at fault or not. The deductible will be due if someone hits you, you hit someone or even if a deer runs into your vehicle. 

If you feel that you are completely blameless in an accident you should make a claim against the driver who hit you. Their insurer will investigate and determine fault, if they find that you are partially to blame you will need to make a claim against your collision to get your vehicle fully repaired, which will involve a deductible.

One of the few exceptions to comprehensive deductibles and collision deductibles is a windshield claim. This will vary by state but in many states and with many insurers, the deductible is waived for windshield claims. Check with your insurer in regards to their policy and your windshield coverage.

Another exception may exist if you are in an accident with a driver who is covered by the same insurer as you. In some cases they may elect to waive the deductible if you make a claim on your collision policy. This will vary by circumstance but it never hurts to ask your insurer for a waiver.

Other coverages may have a deductible associated with them as well, it will vary by insurer and even the state that you live in. Personal injury protection (PIP) in no fault states will have a deductible. In some states, uninsured motorist property damage and uninsured motorist bodily injury may have a deductible, check with your insurer in regards to your policy details.

Deductibles and Monthly Insurance Price

Your deductible amount affects how much you pay monthly towards car insurance. And you typically choose your deductible price. So, when choosing how much to pay for your deductible consider how that will affect your monthly payments. The higher your deductible, the lower your monthly cost. Pay attention to small changes that can bring big results.

In certain cases increasing your deductible by $250 could reduce your monthly payments by $50. That could save $600 a year. Pay close attention to your policy’s specific numbers though. The decrease in your monthly payments isn’t always consistent. For instance, there may be a significant decrease in your monthly payments when you switch from a $500 to a $600 deductible. But, there might only be a minimal decrease in your monthly payment when you increase your deductible from $1000 to $1200.

Deductibles can be a hassle but most insurance claims will involve you making a payment to the repair shop. Knowing what type of claims and coverage involve a deductible can help you decide what insurance coverage works best for you.