FAQ About Auto Insurance Deductibles

Are all car insurance deductibles the same? Car insurance coverage provides financial protection in the event of accidents, theft, or some other unforeseen circumstances. But each policy does not come with the same costs. If you're not sure which level of coverage is the best option, take a look at what you need to know about car insurance deductibles.

What Is An Auto Insurance Deductible?

The auto insurance deductible is the amount you are responsible to pay out of pocket. This is the amount you will pay before your insurance provider covers the remaining expenses for a claim. It is your share of the financial responsibility after you have a covered accident or incident when you make a claim. The deductible is a way for insurers to share the risk with policyholders and help to keep insurance premiums affordable.

The deductible applies to various types of claims, including collisions, comprehensive coverage (for non-collision incidents like theft or vandalism), and sometimes personal injury protection (PIP) or medical payments coverage.

How Do Car Insurance Deductibles Work?

Many insurance policies have a deductible. But not every deductible is the same amount. Suppose you have a car insurance policy with a $500 deductible, and you get into an accident resulting in $3,000 worth of damage to your vehicle. In this case you would need to pay the first $500 (your deductible) out of your pocket to repair your car. After you've satisfied the deductible amount that you owe, your insurance provider would cover the remaining $2,500 to repair your vehicle.

Deductibles for auto insurance policies are not all the same. This is just an example—and your individual deductible may cost more or less to pay. Most insurers offer a wide variety of deductible options to accommodate customers with different financial or coverage needs. Some policies have a very low deductible, while others may have a significantly higher out-of-pocket expense minimum.

Do All Deductibles Pay For the Same Thing?

In general, all deductibles pay for the same types of repairs. The specific repairs vary, depending on the incident. But the deductible will always remain the amount you owe out of pocket—whether you only need to repaint a small part of your car or you need the collision shop to completely rebuild the exterior.

Which Deductible Is the Right Choice?

Before you choose a deductible dollar amount, consider how much you can comfortably afford to pay out of pocket in the event of an accident or claim. A higher deductible usually comes with lower premiums (the cost you pay for the insurance policy). But it also means you'll have to pay more upfront when making a claim.

Again, auto insurance is a requirement in the state of Nebraska. According to the Insurance Information Institute, this includes $25,000 of bodily injury liability coverage per person and $25,000 of property damage liability coverage as well as $50,000 of bodily injury coverage per accident. If you want to lower the amount you pay for this minimum coverage you may need to choose a higher deductible policy.

The value of your vehicle may also play a role in determining your deductible choice. If you have an older vehicle with a lower market value, a higher deductible may make sense. You may not want to spend money to repair damage to a car that you are ready to get rid of or to a vehicle that has almost no value.

If you have a newer car, a high-market value vehicle, or plan to keep your car for years to come, a lower deductible policy is a better option to offset possible repair costs. Request quotes with different deductible options to see how they affect your insurance premiums. This can help you to find a balance that matches your budget and risk tolerance.

Do you want to learn more about deductibles? Contact Advantage Insurance Agency for more information.