Understanding Your Car Insurance Deductibles

Car insurance is a must-have not only because it is a legal requirement but also because it will offer you financial protection and peace of mind in case you are involved in an accident. But you will need to pay some cash out of your pocket after a crash. This is known as a deductible.

This is the cash you will pay to cover the expenses arising from your accident before the insurance company pays the rest. Basically, the deductible is a means of the insurance company sharing the costs of your plan with you.

An Aurora-based auto insurance company will expect you to choose the deductible that best suits your financial circumstances. A high deductible generally means the payment of lower insurance premiums. You should make sure you pick a deductible that you can comfortably pay in case of an accident or any element that is covered by your insurance. Not all types of car insurance, however, feature a deductible. The following are the common insurance categories that have deductibles.

Comprehensive Insurance

This cover will pay for almost all types of loss but not those arising from an accident. As such, you are covered for all vehicle damage provided it is not related to a crash with another vehicle. These include the car’s theft, damage from falling objects, explosions, natural disasters and riots.

This is an optional coverage though, essential for those looking for extra protection beyond their basic auto insurance. Some car loan lenders will need you to hold comprehensive car insurance as long as you have not finished repaying your car loan.

Collision Insurance

This covers the damage to your car caused by hitting something. This includes another vehicle, fence or building, among other stationary items.

Collision insurance will repair or at times, replace your vehicle up to its full cash value minus the deductible you have opted for. Collision insurance is also at times required by a vehicle’s leaseholder or lender in addition to your basic coverage.

Personal Injury Protection

woman injured in a car accident

This is sometimes known as no-fault coverage or medical payment insurance. Personal injury protection is an additional cover to the bodily injury liability insurance and covers about 80% of medical costs after a car accident and expenses related to lost wages, funeral costs and rehabilitation after a crash.

The PIP is also a mandatory cover in a few states. Your insurer will meet the expenses of the damages from an accident irrespective of who is at fault.

Fire and Theft Coverage

A few insurers will also have a deductible for fire and theft coverage. This defrays the damages or replacement of your vehicle in case your car is stolen or damaged by a fire. A few insurers will also cover redundancies like natural disasters and damages to your vehicle caused by hitting an animal.

A deductible on your car insurance might be the best choice for the above types of coverage provided you can afford it.  Choosing the best deductible for your situation involves an evaluation of your odds of an accident and the likely cost of damages. If these odds are high, then it will be financially sound for you to pay a high deductible.

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