subject: How Car Insurance Deductibles Work [print this page] Having a car insurance is critical to driving on the roads of most states. They ensure that if something happens, like your car hits another person's car, then both people are covered. Damages, and potentially injuries, are payed for by the insurance companies, so that if the person driving has no money to pay, that's not a problem. Otherwise, there could easily be situations when an accident happens and the other person is left out of luck. But in most policies, there's a deductible specified, cases where you have to pay a certain amount. Let's see how these deductibles work.
Typically, your deductible, also called an excess, is a fixed amount, like $500. This is an amount that the owner of the insurance policy has to pay out of pocket when something happens. For example, let's say you hit a cement wall and your car suffers $900 in damage. Assuming the insurance company decides to pay, which is not always the case if you are responsible for the damage, then you still have to pay the first $500. Then, the company will pitch in with the rest of the money, in this case $400. It's a way for the companies to save some money, and prevent claims for very small amounts. Deductibles have another effect as well. When you make a claim after an accident, often times your insurance premium will go up. This means that your monthly payment will become higher, because the company determines that you are more likely to have an accident, based on your past history. However, the deductible is taken into account when they decide how much more money you'll have to pay. That's why some clauses specify that you can actually volunteer a higher deductible yourself. For example, if you have $900 worth of damage, it may be advantageous for you to pay $800 as a voluntary excess, instead of just the required $500, so that your premium doesn't go up. That's something you can also discuss with the insurance salesman when you buy your policy. You may get a much lower premium by offering to have a higher excess.
Overall, in many cases there is no way to be completely out of a deductible. It would bring a premium that is much higher than otherwise. Still, it's something to keep in mind. When you drive your car, if something bad happens, you need to have the means to pay the deductible, at the very least. This also includes times when you aren't responsible for the accident. If after negotiation with the other car owner you hit, it's decided that he is responsible, then you still have to pay the deductible at the start, but once the other person's insurance company pays, then you can be reimbursed. These are things you may wish to keep in mind.
by: Casey Trillbar
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