What Do Insurance Deductibles Mean?

Insurance deductibles are an important part of any auto insurance policy. But what do insurance deductibles mean for you after an accident?

Understanding the answer to this question can be the difference between paying a large amount out of pocket and avoiding those expenses altogether. This article will discuss insurance deductibles, why they exist, and how they might affect your overall costs after an accident.

Defining Deductibles

A deductible is an amount you pay out of pocket before your insurance company will cover any additional costs. Deductibles exist to help insurance companies manage costs and spread out their risk. In turn, this helps keep premium costs low for policyholders.

When it comes to auto insurance, deductibles are typically set for specific coverages. This means you could have a $500 deductible for collision coverage and a $1,000 deductible for comprehensive coverage. Your plan pays for costs above the deductible up to a certain limit.

What Do Insurance Deductibles Mean After an Auto Accident?

Damages covered by auto insurance typically include health care expenses, vehicle repairs, and other related costs up to your policy limits. But to access the coverage, you will first be required to pay your deductible.

Let's say you have a $500 deductible and get into an accident that costs $2,000 to repair. In this situation, you are responsible for the first $500 (your deductible). The insurance company will pay for the remaining $1,500 of the repair costs.

Choosing a Deductible Amount

Generally, when you purchase auto insurance, you choose your deductible amount. The typical auto insurance deductible ranges from $100-$1,000. If you choose a lower deductible, you will have a higher premium. This is because you're transferring the risk to the insurance company.

On the other hand, if you choose a higher deductible, your premium will be lower. This is because a higher deductible shifts the risk to you, making it less expensive for the insurance company. However, if something happens and you need to file a claim, you'll have to pay a larger amount out of pocket before your insurance company will cover the remaining expenses.

Are Higher Deductibles Worth the Risk?

When you choose a high deductible, it's important to consider whether or not you can afford to pay out of pocket for the damages if you need to file an accident claim. For example, if you choose a $500 deductible, make sure you have at least $500 set aside in case of an emergency.

Generally speaking, higher deductibles are worth the risk if you're looking for ways to save money on your auto insurance. Keep in mind, though, that higher deductibles mean more pocket costs. If you're not comfortable with the risk, you might consider choosing a lower deductible or looking into other insurance coverages to protect yourself and your vehicle.

Some drivers may feel more comfortable with a higher deductible because of their health insurance plans. A higher deductible on your auto insurance policy may be offset by a lower annual deductible on your health plan.

Additionally, if you have a lower-value car and have not had an accident in some time, you may be able to afford the risk of a higher deductible. However, accidents can happen anytime, so this decision must be made carefully. Even the most attentive drivers can be in an accident due to another driver's negligence. While the other driver's insurance will cover some costs, you may still be responsible for your deductible to cover other expenses.

Are There Any Exceptions?

Your auto policy is unique to you and your circumstances. Suppose you have extenuating circumstances, such as a high-value car or a history of accidents or reckless driving, or you have filed multiple claims in the past. In that case, your insurance company may impose higher deductibles to lower your premium costs.

Ultimately, the decision of what deductible you choose is up to you and is based on your needs. Make sure to shop around and weigh your options to make the best decision for your situation.

Final Thoughts

The right auto insurance plan pays off in the long run. By choosing the right coverage for your unique needs, you can rest assured that you're protecting yourself and your vehicle without paying an excessive amount out of pocket. And when you do have to file a claim, you'll know that your auto insurance policy is there for you when you need it.

D-1 Auto Body is a full-service body shop in Downtown Los Angeles, offering high-quality auto body repair and vehicle maintenance services to help you get back on the road as quickly as possible. If your vehicle is damaged in a motor vehicle accident, we will work with you and your insurance company to ensure you get the best service at an affordable price.

At D-1 Auto Body, we install factory OEM replacement parts that will last for the life of your vehicle. Schedule an appointment today at our auto body shop in Los Angeles.