Is Deductible Insurance a Good Option for Car Owners?
Generally, car deductible insurance is cheaper than health deductible insurance. The premium and deductible are the two most important things to consider when getting car insurance.
If you file an insurance claim, you must pay your insurance deductible. Once your deductible has been paid, your insurance company will cover any remaining repair or replacement costs.
Moreover, several types of insurance coverage are subject to deductibles, including collision deductible coverage, comprehensive deductible, and uninsured and underinsured motorist coverage. They are all subject to the same deductible amounts.
Throughout this blog, we’ve given an overview of car insurance deductibles, how they work, and how they affect your rates:
What is a deductible in car insurance?
When it comes to car insurance deductible, a deductible is the amount your insurance company deducts if you file a claim under comprehensive, collision, or uninsured/underinsured motorist coverage.
You must pay this out of your pocket before the insurance claim process covers the rest. Deductibles are set by the Insurance Regulatory and Development Authority of India (IRDAI), and car insurance is also deductible based on the vehicle’s engine cubic capacity.
The insurance company will submit an insurance claim once your car is damaged by hail. When you file a claim with a car insurance company, a deductible gets deducted. Usually, the deductible is flat, such as $500 or $1,000.
A well-known saying by L.H.: “Insurances are like very expensive flat rates, except that you have to live by their rules in hope to get back a small share of your money.”
High Vs. Low Car Insurance Deductibles
The standard practice is to choose between a high and a low deductible when you buy a car insurance policy. Usually, car insurance deductibles range from $100 to $2,000. There’s nothing wrong with choosing a $500 deductible, but it’s just a matter of preference.
High deductible = Lower insurance rate, higher out-of-pocket
Low deductible = Higher car insurance rates, lower out-of-pocket costs
If you have to file a claim, you should pick a deductible amount you can afford. It’s also important to consider your driving history and the likelihood that you’ll file a claim. Higher car insurance deductibles make sense if you’ve had accidents in the past and drive on heavily travelled roads.
Are Higher Deductibles Advantageous or Disadvantageous?
If you have a high deductible on your car insurance, your premiums will be lower whether you pay for them monthly, biannually, or annually. You may be better off with a higher deductible lower premium if you’re a safe, cautious driver who’s unlikely to get into an accident.
Also, it’s cheaper if you don’t drive much, so there’s less chance you’ll file an at-fault accident claim. When it comes to theft and vandalism claims, you might want to consider a higher deductible if you park in safe areas when you’re out and about.
The downside is that you’re responsible for repairs or replacements if your car gets stolen or vandalized or if you cause an accident. Higher deductibles can save you money if you’re financially stable and can afford to pay lots of out-of-pocket expenses when you file an insurance claim.
Are Lower Deductibles Advantageous or Disadvantageous?
Low deductibles mean your insurance company has to take more responsibility for fixing or repairing your car. The lower your deductible, the lower your financial risk if you have to file a residual claim if you drive a lot, park your car outside, or regularly go to places with car thefts.
On the other hand, choosing a low deductible will mean you pay more upfront for your coverage, but the insurer will cover more of your repairs or replacements. This is a great option if you’re on a tight budget and prefer to pay a higher fixed premium rather than risking a large, unpredictable claim.
How Does Car Insurance Deductible Work?
There’s no deductible on motor insurance, unlike premiums. Your policy’s deductible is what you’re responsible for when you file a claim. Once you pay the deductible, you’ll get the rest of the repair cost.
Here’s an example of an insurance deductible.
The deductible for accidental damage is $2,000, and other damage is $25,000. Sometimes, the company will pay Rs—23,000, and you’ll have to pay the rest of Rs. 2,000.
This example has no depreciation, and it’s simplified for explanation’s sake.
Types of Deductibles in Car Insurance
Car insurance policies have two types of deductibles: The compulsory deductible and the voluntary deductible. You must pay a deductible based on your car’s engine cubic capacity if you have Compulsory Deductibles.
The policyholder usually sets the voluntary deductible. Some people choose a high voluntary deductible when buying a car insurance policy. In some cases, though, claiming expensive damages might get you a lower claim.
In the meantime, the policyholder will have to pay the remaining claim amount. Therefore, setting a reasonable voluntary deductible is a good idea.
Is Your Car Insurance Deductible Going to Affect Your Rate?
This chart shows how adjusting a collision deductible can change the cost of collision coverage for a six-month policy that costs $420. You’ll save the most when you raise your deductible from $100 to $250; when you raise it from $1,000 to $2,000, you’ll save the least.
|Deductible||Six-month cost||Cost difference|
What Is the Best Time to Pay a Car Insurance Deductible?
When you claim under a policy with a higher deductible, your insurance company will typically ask you to pay the deductible if your residual claim is approved. Generally, you are not required to write a check or pay your insurer.
You’ll get your deductible back after your claim is approved. You’ve got a $250 deductible, and your claim is approved for $5,000. In that case, you’ll get $4,750 from your insurance company.
If you purchase a comprehensive auto insurance policy, you are guaranteed that you will be protected against accidents and theft. However, minor damages may increase your insurance premiums. This policy aims to reduce claims by introducing deductibles. Under this policy, claims would be limited to damage that would be very costly to repair.
Should you choose a $500 or $1,000 auto insurance deductible?
Generally, insurance rates for deductibles of $500 and $1,000 are similar, but companies will charge more for deductibles of $1,000 and higher. You might find a $500 deductible more attractive in some cases because some companies only charge a few extra bucks a month.
What does a zero deductible mean?
An auto insurance plan with a zero deductible requires no upfront payments. As an example, suppose you purchase collision coverage without a deductible. You will receive full reimbursement for $1,500 in repairs when you submit a claim.
Do you pay the insurance deductible if your car is stolen?
If your car insurance policy covers comprehensive coverage, you are protected against theft. When you file a claim, you will receive your insured declared value if your car is stolen and cannot be tracked.
What does it mean to pay a deductible for car insurance?
You must pay a deductible for each claim before the insurer pays the remainder. The insurer will only pay Rs 9,000 if you file a claim for Rs 10,000; the deductible is Rs 1,000. You will have to cover the remaining amount yourself.
Is it better to have a deductible or not for car insurance?
There is a double-edged sword in voluntary deductibles since a higher deductible also means more money will have to be paid out of pocket during an emergency. It is always best to select a feasible deductible for you to pay.