How Does A Persons Driving Record Affect The Choice Of Deductible
The current thinking is the cleaner the driving record, the greater the consideration one should give to a higher deductible as it will lower premiums. On the other hand, for someone with a less-than-clean driving record, the person should consider taking a lower deductible, despite the additional premiums. You can also consider a program that rewards safe driving, like Nationwides Vanishing Deductible, which allows you to earn $100 off of your comprehensive and/or collision deductible for every year of safe driving. Up to $500 total.1
The bottom line is that choosing the right deductible takes time and consideration. A specialized insurance agent can help consumers make the best decision based on their driving record, current finances, credit record and overall financial planning goals.
1 , Accessed December 2021.
How Does A Deductible Work
Lets say the collision coverage on your car insurance policy has a $500 deductible. You damage your car in a covered accident. It costs $3,000 to repair. Youd pay $500 toward repairs, and your insurer would cover the remaining $2,500.
Unlike health insurance, which typically has one deductible to meet each year, the deductible on an auto or homeowners insurance policys coverage will apply each time you file a claim.
Does Your Lender Have Deductible Requirements
Unfortunately, your coverage deductibles may be dictated by the conditions of your loan. If you raise your deductible, your lienholder may not notice immediately away. Still, if they do, they will add force-placed insurance, also known as collateral protection insurance, to your monthly payments. If you don’t keep up with your lender’s insurance requirements, you risk losing even more money by paying for coverage you don’t need.
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When Do You Pay An Auto Insurance Deductible
Anytime you go to your own insurer to file a claim for damage to your covered automobile, a deductible will apply whether you are at fault or not. Deductibles most commonly apply to comprehensive and collision coverage, but there may be a deductible for Personal Injury Protection coverage or uninsured/underinsured motorists property damage coverage as well.
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Do You Want To Pay Less For Car Insurance Or Repairs
A higher deductible will generally lower your insurance premium, but you will pay higher out-of-pocket costs if you file a claim for damage to your vehicle. Some claims may even be covered under your deductible and you might have to pay the entire amount out of pocket if you filed. For example, if you back into a tree and do $350 worth of damage to your vehicle and your collision deductible is $1,000, you will pay out of pocket for all the repairs.
If you opt for a lower deductible, your car insurance rate will likely be higher, but you would have lower out-of-pocket costs if you file a claim. If your deductible is $100 and you cause that $350 damage by backing into a tree, you would only have to pay your $100 deductible, while your insurance would pay the other $250. However, you could spend more on your premium by having a lower deductible and never end up filing a claim. This is the nature of having insurance coverage and an example of the risk both you and the insurer take on.
Is It Better Financially To Have A Low Deductible And A Higher Premium
That depends. Someone with a low deductible/higher premium ratio can go through a 10-year period without filing an insurance claim. The person will end up having paid more money over that time in total premium than someone else with a higher deductible. Alternatively, a person can end up filing several insurance claims in just a few years.
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When It Doesnt Make Sense To File A Claim
Also worth noting is that if your deductible exceeds the amount of repairs needed for your car, it doesnt make financial sense to file a claim. Lets say the repair bill for your car is $800 but your collision deductible is $1,000. In this case, youd be stuck with the entire repair bill because the repair costs are lower than the deductible amount. Theres no reason to file a claim in a case like this.
Also, even if your repair bill is higher than your deductible, you may want to consider whether a relatively low payout amount is worth a potential insurance rate hike at renewal time. For instance, if you have a $1,000 deductible, and you file a $1,600 claim, you would get $600 to fix your vehicle. But if its a collision claim, your insurance company might increase your rates. That means it could cost more for coverage over the long-term, even though you got $600 to fix your car.
Car Insurance Deductibles For At
Car insurance deductibles are usually required when you are the at-fault driver. If you were not at fault, the other drivers insurance company should pay your repair bills, up to the limits of the policy. If it is not clear who was at fault, the insurance company must investigate. This investigation can take some time, however your car is probably waiting in the repair shop.
If you need your car back to go to work and run errands, you might end up paying the deductible out of pocket. If that happens and the other driver is later found responsible for the collision, you should get your deductible back after the two insurance companies finish looking over the evidence. Essentially, the other drivers insurance company pays your insurance company, and you receive a deductible reimbursement.
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How Much Comprehensive Insurance Should I Have
You cannot choose how much comprehensive insurance to buy. The most your insurance will payout is the cars actual cash value what the car was worth on the market before the damage occurred minus your chosen deductible amount.
You can negotiate the actual cash value of your car in the event of a total loss by providing different examples of similar cars. Settlements should include taxes and fees you paid at purchase.
Are You Leasing Or Financing Your Car
People who are leasing or financing their car tend to choose a lower deductible. This provides better coverage in the case of a claim. This is necessary for people who dont own their car, because they are responsible for returning the car in working condition no matter whatwith or without the financial help of insurance.
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Auto Insurance Coverage With Deductibles
Car insurance policies are broken up into multiple types of coverage. Liability insurance, which includes bodily injury and property damage coverage for the other party involved in an accident, does not typically have any deductible attached.
Generally, deductibles are only applied to two forms of coverage.
- Collision coverage pays for damage done to your vehicle when you are in a crash with another vehicle or any stationary object. This pays for the cost of repairs and/or replacement for your own car. Collision coverage does not cover the damage you caused to other people’s property.
- Comprehensive coverage pays for damage done to your vehicle in all instances other than a crash for which you are at fault. This includes things like falling tree limbs, hail and many other types of damage to your car.
High Vs Low Car Insurance Deductibles
In most cases, you can choose whether you want to pay a higher or lower deductible for car insurance. Car insurance deductible amounts typically range from $100 to $2,000. The most common deductible our drivers choose is $500, but there’s no wrong choice. Ultimately, it comes down to what you prefer:
Higher deductible = Lower car insurance rate and higher out-of-pocket costsLower deductible = Higher car insurance rate and lower out-of-pocket costs
Choose an auto deductible amount you’re comfortable with, and make sure you can afford to pay your deductible out of pocket in the event of a claim. It’s also important to consider your driving history and the likelihood of filing a claim. You may opt for a higher car insurance deductible because you’re betting against having an accident, but if you’ve had accidents in the past and often drive on busier roads, you may be more likely to file a claim and pay a deductible.
If you live in a state where cracked windshields are common, you may want to choose a low car insurance deductible for windshield replacements. Depending on your state and insurer, you may have no deductible on glass replacement coverage or have the option to select a $0 deductible, which will increase your rate.
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Insurance Deductible Vs Out
The dollar limit you have to pay for the year, before your insurance covers the rest
Includes payments like deductibles, coinsurance, and copayments
Most policies come with an out-of-pocket limit, which is different from your deductible. Your out-of-pocket costs are the limit you should pay for a set period. If your policy had a limit for out-of-pocket costs for one year, you’d only have to pay up to a certain amount before your insurance would cover the rest.
For instance, suppose your out-of-pocket limit is $1,500. The light post took $500 of that from your annual responsibility. If it was a bad year on the road for you, and two other drivers hit your car in different accidents, you have $1,000 more worth of deductibles.
You no longer have to pay any other deductibles, since you met your out-of-pocket limit for the period. Your provider should now pay 100% of your covered expenses for the rest of the term .
What Is A Good Comprehensive Deductible
A good comprehensive deductible is an amount that the policyholder can afford to pay if their vehicle is suddenly damaged by something other than a car accident, such as vandalism or a natural disaster. Comprehensive insurance deductibles typically range from $100 to $1,000, but they can sometimes be as high as $2,500. You choose your read full answerdeductible when you purchase your policy, and the higher the deductible is, the lower your premium will be.
Comprehensive Deductible Example
As a reminder, a comprehensive deductible is the amount that you have to pay out-of-pocket when filing a comprehensive insurance claim. For example, if a hailstorm causes $5,000 in damage to your car and you have a $1,000 deductible, your insurance company will only pay $4,000 for the repairs.
How to Choose Your Comprehensive Deductible
Before you decide on a deductible, you should consider how likely you are to file a comprehensive claim. If you live in an area that is prone to natural disasters or has a high crime rate, for instance, it may be a good idea to get a low comprehensive deductible.
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Factors That Determine Your Deductible
The structure of car insurance deductibles and premiums are based on risks. The basic idea of a deductible is that if you have a high deductible on your policy, then you are less likely to file claims thus making you less of a risk for your insurance company.
But if you opt for a lower deductible, then you are more likely to file a claim for repairs. This means that your premium will be on the higher side because your insurance company will rate you as a high risk.
There is no uniformity in the plans when it comes to everyone. For some having a high deductible is not right and for some having a lower deductible is not right. When you decide on your deductible always factor in your lifestyle, driving style, and your financial status.
How Do Health Insurance Deductibles Work
It’s vital to know how your health policy worksyou do not want to risk your health because you chose a health plan with too high a deductible.
Deductibles are part of health insurance plans also. If you have a $1,000 deductible, you’ll pay the first $1,000 of the cost of your care. Once you pay it, you typically only have to pay coinsurance or a co-payment when seeing the doctor.
With some policies, there are certain services, such as check-ups or disease-management programs, where you won’t need to pay. That’s why it’s a good idea to check with your insurer and see whether that applies to your plan.
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How Do Deductibles Work With Health Insurance
Health insurance policies also have a deductible, but its different from a home or auto deductible. Once youve paid the full amount of your annual health insurance deductible, you usually only pay co-insurance or a co-payment when you get medical services moving forward.
However, some services, like basic checkups and vaccines, might be fully covered before you pay your entire deductible. Each insurance company and plan is different, so its a good idea to find out whats covered and what youre required to pay for your specific policy.
When Do I Pay A Car Insurance Deductible
If youre involved in a car accident, figuring out who is at fault is a crucial component of determining who is responsible for paying your deductible.
When you are determined to be at fault for an accident and have comprehensive and collision coverage, you will likely need to pay for your car insurance deductible as part of the process for getting your vehicle repaired or replaced. The deductible typically isnt paid to the insurance company but is instead withheld from the reimbursement check you receive from the insurance company when your claim is settled.
If the other driver is deemed at fault for the accident, their insurance company is responsible for paying for the damages, and you wont have to pay your deductible as part of the claims process. If you have collision coverage, however, you can choose to file with your own insurer, who can then seek reimbursement, including the amount for your deductible, from the other drivers insurance company.
For example, if you are hit by a driver who is clearly at fault but the claim is not resolved in a timely manner, your insurer may step in to pay for the repairs or losses and then pursue full reimbursement through the other companys carrier.
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Can A Car Insurance Deductible Be Waived
In most situations, for coverages with a deductible, a deductible will apply – but there are some circumstances in which the deductible may be waived. For example, if you have comprehensive coverage and make a claim to repair windshield glass damage, then your deductible may be waived. Check with your insurance representative to verify what deductibles apply. In some states, you may purchase additional auto insurance coverage that will waive your deductible in some scenarios. Check your state reference page for more information.
Now that you know more about how deductibles work, get a free car insurance quote from GEICO today.
The above is meant as general information and as general policy descriptions to help you understand the different types of coverages. These descriptions do not refer to any specific contract of insurance and they do not modify any definitions, exclusions or any other provision expressly stated in any contracts of insurance. We encourage you to speak to your insurance representative and to read your policy contract to fully understand your coverages.
Some discounts, coverages, payment plans and features are not available in all states or all GEICO companies. Coverage is subject to the terms, limits and conditions of your policy contract.
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Is A Vanishing Deductible Worth It
If its free, a vanishing deductible is well worth it. But if a car insurance company charges for the perk, compare the savings you might get from a vanishing deductible to how much more you will pay for the policy add-on.
If youre a safe driver and you dont drive much, you may be better off keeping money aside for a deductible instead of paying for something you might not ever use.
On the other hand, if you drive a lot, a vanishing deductible might be worth the additional cost. For example, if you have a long commute, your chance of an accident is greater than that of a remote worker or someone with a short commute, so paying for a diminishing deductible may be a smart move.
How Does My Deductible Work
The definition of a deductible depends on the form of policy to which you apply. The meaning of your deductible differs even between home and auto insurance. A premium is a part of your financial obligation for repairs to your car for your car insurance.
If your policy has a line of $5000 in coverage. A low deductible of $500 means your insurance company is covering you for $4,500. A higher deductible of $1,000 means your company would then be covering you for only $4,000. Since a lower deductible equates to more coverage, you’ll have to pay more in your monthly premiums to balance out this increased coverage.
Many car insurance providers will take the deductible out of the indemnity payment , or the deductible will be paid directly to a repair facility if you prefer to fix your car.
When it comes to car insurance deductibles there are generally two ways: choose a higher deductible to get a lower car insurance premium or prefer a lower deductible to reduce your out-of-pocket expenses in the case of an accident.
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