How a Car Insurance Deductible Works

You may have wondered before, how does a car insurance deductible work? What are the different types of deductibles, and does the amount affect the monthly payments?

In simple terms, a deductible is the amount of money you commit to pay out of pocket before your insurance company begins to pay you any benefits. You will pay this amount for your expenses after an accident, and then your auto insurance company will start to pay the rest.

For example:

Say you have a deductible of $500 and you rear end someone. If you are the at-fault driver, the coverage will have to come from your collision policy. If your damages are $2000, you will have to pay the $500 deductible and then your insurance will pay the remaining $1500.

Now let’s say it was a smaller accident and your damages were only $400. You would pay the full $400 and your insurance would not pay anything, because you did not reach the deductible.

Different types of deductibles:

A deductible can be a fixed amount or a percentage of the total cost of your claim. The example above uses a fixed deductible. This number is something you will agree upon with your insurance company before you sign your policy.

If your deductible is a percentage of the claim, it will be a lot less certain. If it is 20 percent, then the wreck where you only have $400 damage, you will only be paying $80. However, if you get into the larger wreck where your damages are $2000, you will be paying $400. So this option is a bit of a risk.

High vs. low

It can seem like a good idea to choose a very low deductible, but keep in mind that a low deductible will mean a high premium. This means that you will pay less of your damages after an accident, but your regular monthly payments will be higher.

So if you choose a higher deductible your premium price will be lower. Just remember, if you choose a high deductible, you need to have at least that much money saved in case you get into an accident and have to pay it.

Where to find your deductible:

If you already have a personal auto insurance policy, you can find the amount of your deductible on the main page of your policy, known as the Declarations Page. This is the most important part of the application, as you can find not only your deductible here, but also the types of coverage you have, their limits and all of your personal information, which must be kept up to date. It is near the front of your policy.

Check to see what your deductible is, and if you have any trouble finding it or any other questions at all, call an Infinity agent at 1-800-INFINITY!


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