| The terminology surrounding car insurance can be | | | | Which option you choose (high deductible/low |
| a bit confusing if you don`t know what they | | | | rates or low deductible/high rates) will depend on |
| mean. One of the most important terms that you | | | | what you can afford and also how often you |
| will come across is "deductible". Even if you don`t | | | | expect to need your insurance. If you tend to |
| understand much else, this is one word that is | | | | have an accident of some sort every few |
| absolutely vital to choosing your car insurance. | | | | months, you will likely want to pay the minimum |
| Quite simply put, deductible is the amount you | | | | amount and let the insurance company take on |
| have to pay in case of an accident. However, it`s | | | | the majority of costs. For safer drivers who have |
| more complicated than this and your car insurance | | | | an excellent driving record, it`s easiest to go with |
| strategy will depend greatly on how much you | | | | the higher deductible and pay lower rates instead. |
| actually can afford to pay. | | | | Limitations |
| How It Works | | | | Every insurance company has a limit to the |
| The deductible is the amount you pay in case of | | | | amount they will pay. The rates you have each |
| an accident, before the insurance company. For | | | | month will also affect this, so you can decide how |
| example, if you have a deductible of $500 and | | | | high you want to go for the best limit, without |
| the damage in an accident is $1,500, you would | | | | needing to pay too much per month. The |
| pay the first $500 and the insurance company | | | | majority of drivers never need the highest limits. |
| would pay the remaining $1,000. Likewise, if your | | | | How does the limit affect your deductible? Well, |
| deductible was $1,000 and the damage was only | | | | you are responsible for paying the amount of |
| $800, you would pay the whole thing. | | | | your deductible, of course, but once the insurance |
| Deductible Affects Your Rates | | | | company has paid up to the limit, you will have to |
| Car insurance requires that you pay a specific | | | | pay any costs over that. |
| amount per month or year. This is your monthly | | | | To give you a quick example, let`s say your |
| rate and it usually won`t change within the year, | | | | deductible is $500, the limit is $10,000 and |
| unless you are in an accident. The amount you | | | | damages end up costing $12,000. You would pay |
| pay on a monthly basis will depend on how much | | | | the first $500. The insurance company would then |
| deductible you wish to pay, or how much of the | | | | pay their $10,000 and you would be responsible |
| upfront costs you are willing to take care of in | | | | for the remaining $1,500. |
| the event of an accident. | | | | Your car insurance doesn`t have to be confusing. |
| The most common amounts for deductibles in car | | | | Take the time to go over the numbers and figure |
| insurance are $100, $250, $500, and $1,000, | | | | out what you would be able to afford out of |
| though different companies may offer other | | | | pocket in case of an accident and how much you |
| options. The higher the deductible, or the amount | | | | can afford to pay on a monthly basis. A little |
| you pay in case of an accident, the lower your | | | | research can go a long way. It`s also helpful to |
| monthly rates will be. So, if you opt for the | | | | speak with the car insurance agent who can give |
| lowest deductible, $100, meaning the insurance | | | | you a good idea of what the norm would be for |
| company is liable for nearly all costs, you`ll end up | | | | your car`s age and your driving experience. |
| paying higher monthly rates. | | | | |