When buying car insurance, you will probably come across the word ‘deduction’ and you may be wondering how it affects you and your insurance costs – and when you will actually have to use it. What is an auto insurance deductible?
A car insurance deduction is the amount that you must pay after submitting an approved insurance claim. Your insurance company covers the rest, up to the insurance limit.
How does insurance that can be deducted work?
Imagine a deduction as part of your “contract”, here’s how it works: By buying insurance, you protect yourself from unforeseen financial risks in the form of losses or damages. When you buy insurance, you ask the insurance company to “have its back” if you suffer damage that can hurt you financially. In turn, the insurance company usually says: “Sure, I will cover you if you incur a loss (claim), but will you agree to pay the first part by paying the deduction?” Using the example of a $ 500 deduction, you say, “Sure, I can afford to pay the first $ 500 for any loss if you can pay the rest.”
Do I have to pay a deduction if I am not guilty?
In short, it depends on where you live. In most states, if you are in an accident due to the fault of a co-driver, their liability insurance is usually responsible for covering your repairs up to the insurance limit.
But if you live in a faultless state, it doesn’t matter who caused the accident. If your car is damaged and you have collision insurance, you will have to file a claim with your insurance company and pay a discount before starting the insurance.
In these scenarios you will most likely have to pay a deduction:
- You have an accident involving one car, such as sliding onto a wet pavement in a tree. Your collision insurance would probably help pay for repairs, up to the insurance limit, after paying the deduction.
- Your car has been stolen or damaged by vandalism, natural disaster, falling object or animal. Your comprehensive insurance usually helps to cover repair costs up to the insurance limit, minus the deduction.
- Your windshield is cracking or cracking. Comprehensive insurance generally covers glass breakage up to the insurance limit, less tax deductible costs.
When you don’t have to pay a deduction
The deduction will not apply in the following situations:
- An insured driver hits you
If the other driver is officially found guilty, his insurance company may pay for your repairs if you choose, and you won’t have to pay a deduction. Or, if you have collision insurance, you can choose your insurer who will apply for reimbursement (including deduction) from another driver’s insurance company. In situations where the wine is shared, you can eventually pay all or part of your deduction.
- Another person is making a claim under third party liability insurance
Liability claims are not deductible. This means that you don’t pay anything out of pocket for a claim in an accident in which the insurer pays for damage and / or injury you have caused to another person, up to the limits of the policy.
- No deduction selected
In some states, you’ll be able to deduct $ 0 under the full policy coverage.