Defining Insurance Deductibles

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Deductibles might be a standard part of car insurance policies, but that doesn't mean everyone understands how they work. In fact, many drivers aren't aware of how your deductible amount impacts how much you pay for car insurance.  

If you want the most affordable car insurance, choosing a higher deductible is one way to keep your monthly insurance payments low and stay covered, but it's not the best option for every driver. 

Sound confusing? Fear not. Keep scrolling to learn how car insurance deductibles work and how to choose the right deductible amount for you, plus how adjusting your deductible could help you lower your monthly car insurance payment. 

What is a car insurance deductible? 

A deductible is a set amount of money that you must pay upfront and out of pocket when filing a covered claim before your insurance kicks in to help cover the rest of the damages. Car insurance coverages like comprehensive and collision often include a deductible, and you may also see it associated with other coverages like medical payments and personal injury protection.

Typical car insurance deductibles range from $100 to $1,500. Generally speaking, the higher your deductible is, the lower your premium will be. 

How do car insurance deductibles work? 

Say you get into a covered accident that causes $4,000 worth of damage to your vehicle. Your deductible is $500. You would pay the $500 deductible, and your insurance would pay the remaining $3,500 in damages. 

Your car's actual cash value (ACV) is considered in this situation as well, which is determined by factors like your car's age, condition, and the amount you paid for it. As long as the amount of damage does not exceed your vehicle's ACV, your deductible and insurance would cover all damages. 

What car insurance deductible should I choose? 

Depending on the type of coverage (like comprehensive or collision), the typical deductible falls between $100 and $1,500. If you're wondering what deductible amount you should choose, consider how much you'd be willing to pay if you needed to file a claim. 

To a certain extent, your deductible amount is usually up to you unless you are leasing or financing your vehicle. Leased or financed vehicles typically have their own deductible requirements you must follow. 

However, if you aren't leasing or financing your car, you can usually choose a deductible amount that you feel good about. Just keep in mind that: 

  • A higher deductible generally means a lower insurance premium but higher out-of-pocket costs in the event of a claim
  • A lower deductible generally means a higher insurance premium but lower out-of-pocket costs in the event of a claim

Remember: in the event of an auto accident or claim, you will be responsible for paying the deductible, so it's important to make sure it's an amount that fits your financial situation. 

If you decide on a higher deductible, do your best to keep at least that amount of money set aside in savings. That way, if you get into an accident and need to file a collision or comprehensive claim, you have enough cash on hand to pay your deductible and get your car repaired as quickly as possible. 

If you opt for a lower deductible with a higher insurance premium, you can always customize your insurance payments* so your coverage feels more affordable.

Either way, the friendly, knowledgeable agents at Direct Auto can help you choose the right deductible for your situation. For more information about car insurance deductibles or a free quote on affordable coverage, call 1-877-GO-DIRECT (1-877-463-4732) or stop by a Direct location near you!

*Payment plans are subject to terms and conditions and may not be available in all locations. Price may vary based on how you buy. Not all products, discounts, or pay plans are available in all states. Insurance is underwritten and administered by members of the Direct General Group, Nashville, TN.

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