Auto Insurance Deductibles: How Much Can You Save?

The amount a driver pays for auto insurance premiums is determined by a myriad of factors. These include the year, make, and model of the vehicle they drive, their driving record, their credit score, where they live, the types and amounts of coverage that are added to the policy, and the deductibles they choose.

Insurance Companies And Deductibles

Auto insurance deductibles are like get out of jail free cards for insurance companies. They don’t have to pay their insured’s damages until the deductible amount is surpassed. The amount of the deductible can greatly significantly affect the monthly cost of comprehensive and collision protection and the cost benefit should be carefully considered. Insurance providers are in the business of managing risk and costs. Since much of the damage caused to vehicles comes in the form of small scratches, scrapes, dings and broken windshields, insurance companies don’t want to pay and manage the claims of each and every mishap of their insureds. Deductibles are a way of protecting the coverage provider against minor damages that are very common among vehicle owners, but can really add up.

How Do Deductibles Affect Claim Payments?

Insurance companies offer most drivers several different deductible amounts when constructing a policy. Collision insurance covers damage to a vehicle or personal property owned by the policyholder. The amount of the repair costs up to the deductible is paid out-of-pocket. When property damage repairs are needed that exceed the deductible, the insurance company will deduct the amount chosen from the entire settlement. The remainder will be paid for by the insurance provider under collision The amount of the deductible can be as little as $250 or as much as $1,000, depending on the insurer.

Which Types of Coverage Have a Deductible?

In most states, collision and comprehensive are separate portions of a policy, and each coverage type has a deductible. Usually comprehensive and collision coverage are not required under the law, although if the vehicle is financed, the lender will likely require collision and comprehensive coverage. Also, Uninsured/Underinsured Motorist property damage coverage, which is required in some states, also may carry a deductible.

Advantage of a Low Deductible

The lower the deductible amount, the higher the monthly premiums. A very low $250 deductible will cost the insured more in premiums each and every month, but will mean a smaller out-of-pocket payout if a property damage claim occurs. This makes it easier for the insured to cover his or her portion of the repair bill. Most auto repair shops honoring an insurance settlement will not begin repair work until the deductible is covered. A lower deductible helps take care of this one-time payment.

Choosing A Higher Deductible Amount

If a higher deductible is chosen, consumers may save as much as 30 percent on their collision and comprehensive insurance premiums. Because this is a sizeable amount of money, insurance shoppers should carefully consider what will happen if an accident occurs. If the damage to the vehicle totals about $2,000 in repair costs, the owner may be paying about half of the bill. Because the insured chose a $1,000 deductible amount, perhaps as much as $25 per month has been saved in premium costs. After several years with no accidents, drivers choosing this higher deductible may have actually saved more than the increased out-of-pocket expense.

Shopping For the Right Deductible Amount

It is important for all insurance shoppers to look carefully at their monthly budget, the neighborhood they live in , and their driving habits before deciding on a deductible amount. If the insured is infrequently involved in collisions and has a low risk of vehicle theft, choosing a higher deductible may be the better choice. On the other hand, lower auto insurance deductibles may benefit those who may have a greater risk of collisions or vehicle theft. The insurance will cost somewhat more, but the individual will not be stuck with as large bill for his or her portion of the repair or vehicle replacement expense.

The team at DiscountCarInsuranceQuotes.net contributed this article, where drivers can find out about how much auto insurance they may need, get money saving tips, and compare free quotes from top brands.

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