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When you are covered under an insurance policy, you pay a monthly amount — a premium, so that in the event of an accident or damage involving your vehicle, you don’t have to pay for all the sudden, and oftentimes, high costs. However, this doesn’t necessarily mean that you won’t have to pay for anything at the time of an accident; there might be a deductible involved that might reduce or limit the amount of money you get from your auto insurance company to pay for car repairs.
What Is a Deductible?
A deductible is a way in which you share the financial burden with your insurance company. It is the amount that you have to pay before the insurance coverage can kick in. Unlike healthcare insurance, when it comes to car insurance, you have to pay for the deductible every time you file a claim instead of once for every calendar year.
For example, say you filed a claim for $30,000, but you have a deductible of $2,000. In this case, the insurance company would require you to pay the $2,000 first before they’re able to cover the rest. Or, they might simply withhold the $2,000 and send you a check for $28,000.
Zero Deductible Insurance — Can You Get One and Is It Worth It?
You can indeed find a car insurance policy that does not include a deductible. This is generally called a zero deductible option. However, this will incur higher premiums since the car insurance company would be undertaking the full costs that might be caused by an accident.
Whether or not the price increase is worth it will depend on your finances. The conventional wisdom for auto insurance is simple — generally the higher your deductible, the less your monthly premiums will be. So people who are trying to save money on monthly or yearly payments may want a high deductible, but that’s risky. Meanwhile, the safer but more expensive option is a low deductible.
An insurance policy with a lower premium but a higher deductible might guarantee lower monthly expenses. Still, it might also bring high unexpected costs if you happen to get in an accident, and as we all know, it is hard to prepare yourself for unforeseen expenses. So, if you like to stay on a foreseeable path and avoid any unexpected expenses, then the price for a 0 deductible policy might be worth it for you.
However, if, on the other hand, you’d rather have lower monthly expenses in exchange for a higher deductible amount. Just make sure always to have enough money saved to cover the deductible your policy states. Having a lower monthly premium won’t do you much good if you cannot cover the deductible because, there’s a very high chance your insurance company won’t cover any costs until after you’ve put down the deductible amount.
Another good thing to note is that some states require deductibles for certain coverages. If you happen to live in any of these states, you would have to pay a deductible for personal injury protection and uninsured motorist property damage no matter what. Make sure to speak with your insurance company for more detailed information.
Do You Always Have to Pay For Your Deductible?
Luckily for you — the answer is no. If you are not the driver at-fault for an accident, your insurance company should cover the full amount of the costs, no deductible involved; this is because your insurance company will try to seek full reimbursement from the at-fault driver’s insurance company. However, if the costs of the damages surpass the limit of the at-fault driver’s coverage and you decide to run the remaining costs through your insurance company — in this case, you might still have to pay for the deductible.
On the other hand, if you’re the one at fault for the accident, while you might not have to pay the deductible to cover the other driver’s expenses, you will still have to pay a deductible for your insurance company to cover your own costs.