How Do Auto Insurance Deductibles Work?

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If you are looking at the different types of auto insurance coverage, you might have noticed that some of them have a deductible. Additionally, you might have heard that depending on the deductible you choose, you might be able to save money on your auto insurance plan. For this reason, car insurance deductibles are one of the most common questions that car insurance companies get. In this article, we’ll cover the basics about auto insurance deductibles to help you make the best choice about the coverage you need.

What is a Car Insurance Deductible?

A car insurance deductible is a pre-agreed amount of money between you and your insurance company. When you get into an accident, you will first need to pay the amount of the deductible, while the rest of the cost will be covered by your insurance plan up to the agreed maximum limit. For example, if you have agreed on a car deductible of $300 and the damage of your car is $3,000, you will pay $300 and the insurance company will pay the rest $2,700. However, if your deductible is $500 and the repair of your car costs $200, your insurance plan will not cover it. This is because the insurance company will only pay for damage that surpasses the amount of your pre-agreed deductible.

What is the Difference between High and Low Deductibles?

For the types of auto insurance coverage that require a deductible, you can select the amount you wish from the pre-determined options provided by the insurance company. Your options can vary between a deductible of $0 and up to a couple of thousand dollars. The most common amounts are that of $250, $500, and $1,000.

In general, you can use the car insurance deductible as a way to save up on your auto insurance. Keep in mind, that the higher deductible you choose, the lower your premium will be. On the contrary, if you go for a lower deductible, your insurance plan will be pricier. Therefore, if you have saved up enough money to cover the cost of the deductible, you might prefer to have a higher one in order to have a lower monthly premium payment. This way, you will end up saving more money every year.

If you are a driver that is 50+, you may want to consider getting auto insurance through AARP Auto Insurance Program from The Hartford. Members are offered exclusive car insurance savings and benefits. The AARP Auto Insurance Program from the Hartford offers a Disappearing Deductible for auto insurance. With optional Disappearing Deductible†, we’ll reduce your collision deductible over time, as long as you keep a clean driving record. To be eligible for the AARP Auto Insurance Program from The Hartford, you must be 50 years or older and a member of AARP.

What Types of Coverage Require Deductibles?

The types of coverage that often require deductibles are:

  • Collision Coverage: this type of coverage protects you when your vehicle collides with another car or a wall.
  • Comprehensive Coverage: this type of coverage help cover costs if your car is damaged by theft, vandalism, or a natural phenomenon.
  • Uninsured and Underinsured Motorist Coverage: this is very helpful coverage, as it protects you when you aren’t at fault, but hit by a driver who is underinsured or uninsured.

The most common type of coverage that doesn’t require a deductible is Liability Coverage. If you cause an accident, and thus property or bodily damage, your insurance company will cover the costs up to the maximum amounts you select for your policy.

Moreover, if you are not at fault, then you and your insurance company can file “third-party claims”. This way, the other driver’s insurance company will cover the cost of the repairs needed for your car or your medical bills.

Car deductibles can influence the price of your premium. It’s important to weigh the pros and cons when deciding on a high vs. a low deductible. If you can afford it, a higher deductible could potentially save you a significant amount of money by lowering your monthly premium, but you need to be prepared to pay higher up front costs for any expenses you may incur in the event of an accident.