{"id":5579,"date":"2023-04-14T07:57:00","date_gmt":"2023-04-14T07:57:00","guid":{"rendered":"https:\/\/www.freeway.com\/knowledge-center\/?p=5579"},"modified":"2023-09-22T13:21:34","modified_gmt":"2023-09-22T13:21:34","slug":"car-insurance-deductible","status":"publish","type":"post","link":"https:\/\/www.freeway.com\/knowledge-center\/auto\/car-insurance-deductible\/","title":{"rendered":"The Importance of Understanding Deductibles in Car Insurance"},"content":{"rendered":"\n

When thinking about your car insurance<\/a>, you might consider premium costs and different types of coverage. But have you ever considered your deductible?<\/p>\n\n\n\n

Deductibles are probably something you don\u2019t give much thought to until you need to use them. That\u2019s why we\u2019ve put together this guide to help you understand what a deductible is as well as when you might need to pay it.<\/p>\n\n\n\n

The Importance of Understanding Deductibles in Car Insurance<\/strong><\/h2>\n\n\n\n

Car insurance is a necessary expense for any driver on the road. It provides financial protection in the event of an accident or other unexpected incidents that can cause damage to a vehicle. One key factor that drivers need to understand when purchasing car insurance is how the deductible works. A deductible is the amount of money that a driver must pay out of pocket before their insurance coverage kicks in. The amount of the deductible can have a significant impact on the overall cost of insurance and the amount of coverage that is provided. <\/p>\n\n\n\n

Understanding how car insurance deductibles work can help drivers make informed decisions about their insurance coverage and ensure that they are adequately protected in the event of an accident. Freeway Insurance is one of the leading providers of car insurance in the United States, offering a range of insurance options to meet the needs of drivers of all types. As a trusted and reliable provider of insurance, Freeway Insurance is dedicated to helping drivers understand the ins and outs of car insurance, including the importance of understanding deductibles<\/a>.<\/p>\n\n\n\n

Definition of car insurance deductible<\/strong><\/h2>\n\n\n\n

A car insurance deductible is the amount of money that a policyholder is responsible for paying out-of-pocket before their insurance coverage kicks in. This deductible amount is agreed upon at the time of policy purchase and can range from a few hundred dollars to thousands of dollars depending on the policy and the insurer. For example, if a policyholder has a deductible of $500 and they get into an accident that causes $2,000 in damages to their car, the policyholder would be responsible for paying the first $500, and their insurance company would cover the remaining $1,500. <\/p>\n\n\n\n

Deductibles are a way for policyholders to share the risk of financial loss with their insurance company, and they can affect the cost of car insurance premiums. Generally, higher deductibles result in lower premiums<\/a>, while lower deductibles result in higher premiums. <\/p>\n\n\n\n

Car Insurance Deductible Basics<\/strong><\/h2>\n\n\n\n

Basically, it\u2019s the upfront cost you pay to fix your car. When you\u2019re in an accident and want to get the damage repaired, you\u2019ll just pay a set amount instead of paying the whole bill. This amount doesn\u2019t change, whether the total damage is $800 or $2,000.<\/p>\n\n\n\n

Let\u2019s use an example to illustrate. Let\u2019s say you get into an accident and have $1,000 of damage to your car. You\u2019ll pay your $250 deductible, and the insurance company will cover the $750 in remaining repair bills.<\/p>\n\n\n\n

You might be thinking \u2014 that sounds a lot like my health insurance. While they are similar, car insurance deductibles are different from health insurance ones. The principle is the same (an upfront cost you pay for each claim), but car insurance doesn\u2019t have a limit like health insurance. This means you\u2019ll need to pay the deductible<\/a> for every claim, regardless of how many claims you make or how much you spend.<\/p>\n\n\n\n

Also, keep in mind that deductibles pertain only to the damage to your car, meaning they only apply to things like collision and comprehensive insurance<\/a>. You don\u2019t need to pay a deductible for liability insurance.<\/p>\n\n\n\n

How Can You Find Your Deductible?<\/strong><\/h2>\n\n\n\n

If you already have car insurance but aren\u2019t sure what deductible you have, it\u2019s easy to find out. Your car insurance should have given you a policy form that includes a declarations page. This page has all the pertinent info you need about your policy.<\/p>\n\n\n\n

In this document, you\u2019ll find things like your policy period, coverage limits, and premium cost. But most importantly, you\u2019ll find your deductible. It\u2019s usually listed in its own section where you can see the amount clearly.<\/p>\n\n\n\n

Typically, you\u2019ll have separate deductibles for both collision and comprehensive coverage. Collision deductibles are the ones people usually mean when they talk about a deductible, as this is what you\u2019ll pay if you\u2019re in an accident. Comprehensive deductibles are just as important, but they\u2019re typically paid out for damage from acts of god, like weather or hitting a deer.<\/p>\n\n\n\n

How to Choose the Right Deductible for You<\/strong><\/h2>\n\n\n\n

When putting together your car insurance coverage, you have a say in how much your deductible will be. The number you choose can play a big role in the price of your monthly premium.<\/p>\n\n\n\n

Generally, when you choose a higher deductible<\/a>, your monthly car insurance premiums will be lower. If you think your chances of getting in an accident are low, this might be a good approach. That said, if you do get into an accident, you need to make sure you have enough saved up for the deductible.<\/p>\n\n\n\n

Another drawback of this approach? If your deductible is too high, it might not even make sense to file a claim with your insurance. For example, if you have a $1,000 deductible and your estimate for the damage is only $800, you\u2019ll be paying more than you need to.<\/p>\n\n\n\n

There\u2019s also the flip side of a lower deductible, but this will make your monthly premiums much more expensive. However, if you have a high-value car where you know repairs will be costly, it might make sense to take this approach instead.<\/p>\n\n\n\n

Also, if you have a penchant for getting into accidents, a lower deductible might be better for your multiple claims. That way, you\u2019ll also be able to have smaller problems covered as well that you might normally skip over with a higher deductible.<\/p>\n\n\n\n

With all of these pros and cons in mind, most people play it safe by going in the middle. The average car insurance collision deductible is $500<\/a>, which is typically the best mix of low premium and low deductible costs. That way, you\u2019ll have adequate coverage in an accident without paying a ton of money on a regular basis.<\/p>\n\n\n\n

The best way to calculate your deductible? Run the numbers with the different coverage levels when building your insurance quote to see how they affect the price. Once you better understand how things will play out for you financially, think about the following three questions to really nail down what deductible would work best:<\/p>\n\n\n\n