Reader’s Question:

Can you please explain to me what a car insurance deductible is?

Maria

Albuquerque, NM

Car insurance deductible is always part of auto insurance. They have considerably affected your rates. Choosing a deductible can lower your rates as much as 10-20 percent. While some mentioned around %40 for the highest deductible. Without them, car insurance companies would have to pay higher for claims. As an effect, you will shoulder the load by paying higher premiums.

You need to be careful in choosing the amount for your car insurance deductible. They can be $100, $250, $500 and $1000. Certain states have minimum requirements for it like New York state. Therefore you need what is mandated.

So here’s how it works. Assuming you chose $500 dollars as your deductible. If an accident happens, to which you’re at-fault, and the total claim amounts to $1900, you will pay a portion of this claim. In this case, you will shell out $500 and the insurance will settle for the remainder which is $ 1,400.

Another scenario for application of deductible is: after an accident, your car has been damaged. Repair cost amounts to $250. Since your deductible is $500, you will end up paying for the repair cost and the insurance company isn’t obligated to share the amount simply because the value falls within the portion you chose to pay out-of-pocket.

So you really have to be careful in selecting the amount. You have to ensure that you can afford it. However, that could change in certain conditions. Like in a state that follows a no-fault system, you might get a refund of your deductible if it has been established that the other party was at fault. It may be claimed from the other person’s car insurance or refunded personal by the at-fault party.

Choosing a deductible can lower you rates as much as 10-20 percent. While some mentioned around 40% for a higher deductible.