After buying an insurance plan, one of the common questions that come to mind is about deductible car insurance.
Whenever we hear the term deductible in car insurance, it seems a little bit confusing.
But in this article, I’ll figure out all your confusions about the term deductible. So stick to this article till the end.
What is a deductible in car insurance?
A deductible in car insurance defines the amount or the money you paid before your car insurance coverage.
So that rest of the amount will be covered by the car insurance owner to recover its all damages.
Let’s take an example…
If you have a car accident and your total expense is around $2000 and if you have a car insurance plan.
So as your company’s insurance plane they will give you the claimed amount whenever you make an insurance claim. But first, you’ll have to pay your deductible for your car insurance.
Let suppose if your deductible amount is $500 and you are making a claim for your damages which is around $2000.
In this case, you have to pay your deductible amount from your pocket, which is $500 and the company will issue the remaining amount $1500.
This is called deductible car insurance.
There are some conditions at which car insurance deductible applies.
Car insurance deductible depends upon some various things. So if you are a car owner and have an insurance plan, you should know this.
If you have a car accident and the opponent got serious injury then in this situation your insurance policy will cover all the damages and body treatment as per your premium package.
But for this, you’ll have to pay your deductible amount to your insurance company so that you can claim an insurance amount.
There are also mainly two types of car insurance deductible.
- Collision deductible car insurance
Every day billions of people drive their car and other vehicles for an essential purpose.
And every day lots of people die in road accidents. You also may have had a road accident, but every time your insurance saves your pocket money and you.
But the main factor is that every time you apply for your collision claim you are considered as a fault in an accident by your insurance company.
And resulting in your insurance premiums starts increasing. So yeah, your deductible needs for your collision claim, but it will affect your premium in the long term.
- Comprehensive deductible car insurance
In this type, this comes under when the thing is not in your control. In simple words, when something wrong happens with your car naturally.
If your car is damaged by any natural activity like icefall, storm, tsunami and your vehicle is stolen by someone. Then in this condition, you have to pay for the deductible for your car insurance.
You will have to pay your deductible for your insurance claim. That’s the way you will recover your total expenses from the insurance company.
Here is this condition a natural accident considers it so that it won’t affect your character and also in your insurance premiums.
How do insurance deductibles affect car insurance rates?
Yes, it would definitely affect your insurance rates if your deductible amount is meagre.
If you are applying for an insurance claim many times in a year, then the insurance company would take it as a fault by the driver or car owner.
And it will cause an increment in your insurance premiums.
The primary role of your deductible in your insurance plan is. It behaves like an inversely proportional relationship with your premium.
If your insurance deductible is low, then you have to pay more for your insurance premiums.
But if you wanna keep your premiums low, then you must have a high deductible for your car insurance.
Also Read: Why is my car insurance so high?
What is auto insurance tax deductible?
An auto insurance deductible means the tax amount which you use as a deductible amount when your insurance claims don’t cover your all expense.
But insurance tax deductible does not apply to everyone. It is only applicable to the people who use their vehicle for business purposes.
It is not valid for the people who use their vehicle to travel personally and use it to go to the office daily.
If you are also using your vehicle for business purposes, then you will get insurance tax-deductible.
Let’s break this topic with an example,
If you are a small business owner and you own a truck, then for this the insurance coverage will be costly enough. So, in this case, you can use deductible form insurance taxes.
Otherwise, if you use your vehicle for both personal and business purposes, you have to manage it as a percentage of usage for every sector according to usage. If you use 50% for your business, then your deductible amount will be 50% of your insurance tax.
When Auto Insurance Premium Tax Deductible?
Your auto insurance premiums will be tax-deductible only when you have your car for business purposes.
If you use your car for personal usage or you often use your vehicle, it doesn’t matter. You must use it for your business. Neither you’ll not get auto insurance premiums tax-deductible.
If you have a truck, your insurance will maintain the whole expenses to it. But you will get tax-deductible when you show your vehicle usage.
You will get tax-deductible by the percentage you use your vehicle for business purposes.
Do I have to pay the deductible amount if I’m not at fault?
It depends upon the location where you live and government rules.
But for most of the states if you are in a car accident and in which you are not at fault.
So the other car insurance liability coverage will cover your expenses, including medical fees and your car repairing.
So you don’t need to pay a single penny.
But if you belong to a location where no-fault doesn’t matter, and you are in a car accident.
Also, you are not at fault. You have to claim insurance under collision coverage. For this, you have to pay your deductible amount to claim the full amount from the insurance company.
So there is only one scenario when you don’t need to pay if the other person would have insurance under liability coverage. Neither except this, you have to pay for your damages.
But if you live in a no-fault state, it doesn’t matter who caused the accident. If your car is damaged and you have collision insurance, you’d need to file a claim to your insurance company. For this pay your deductible for your car insurance.
How to choose a car insurance deductible?
Your deductible amount plays an essential role in your car insurance budget.
As you read, I mentioned before; high deductible car insurance will reduce your premiums.
So now it is very important to choose it according to your usage.
For this, I would say location matters a lot just because if you belong to a high population area, the traffic will always be high.
So the chance of your car crash and accident increases not by your choice.
So if you choose a low deductible amount, you have to pay High insurance rates.
And if you choose a high deductible amount, your premium rates will be lower.
So according to cities you should choose a low deductible for your car insurance, it will save you from paying High deductible whenever you make an insurance claim.
Is it good to have a different deductible for different coverage?
Most of the insurance companies have a different policy for different types of coverage. Like if you are claiming for collision coverage, it will gonna cost more from your pocket.
Just because collision coverage is costlier with a high deductible amount, but on the other hand, comprehensive coverage is cheaper, and the deductible amount is also low for this.
So in simple words, I’ll say yes, it is good to have a different deductible for different coverage.
If you have only one car and you are not using too much then it is right for you it will save your time and extra money in your deductible.
But what are the drawbacks to choosing a different deductible for different types of insurance coverage?
If you don’t have a different deductible for different insurance coverage, then it’s okay.
It is not a big reason to worry if you use your car or for business purposes.
Look if you have more than two vehicles, then it will be challenging to manage all your insurance coverage and deductibles for your insurance plan. You also must know about your deductible amount for your insurance, which is quite difficult.
And also there is no significant difference because most of the time people claim collision coverage, not for comprehensive coverage which is cheaper.
So it’s upon you what you’ll prefer.
Some FAQ’S related to deductible car insurance.
How much is configured as insurance deductible?
There is no proper fixed amount defined you can choose by contacting your insurer, which is around $100 to $2000.
It depends upon your plane vehicle and location.
Is the deductible amount refundable when you claim is approved?
No, it’s not the refundable amount; in fact, this amount is used to cover your all expenses for your damages.
The amount will be considered as a part of total expenses, and except your deductible amount, the rest of the amount will be payable by your insurance company.
What is the exact definition of deductible in car insurance?
According to Wikipedia In an insurance policy, the deductible is the amount paid out of pocket by the policyholder before an insurance provider will pay any expenses. In general usage, the term “deductible” may be used to describe one of several types of clauses which are generally used by insurance companies as a threshold for policy payments.