What Is a Car Insurance Deductible?

By: Gabriel Miller

What is a car insurance deductible? If you want to know the answer to this question, you're not alone, as car insurance can get confusing in a hurry. So many insurance providers are out there offering different plans, and you might choose the wrong policy for you if you don't understand how a deductible works. A deductible comes into play after you get in an accident, and the amount of the deductible can vary.

What You Pay After An Accident

A car insurance deductible is the amount that you must pay in the case of an accident or personal injury. The size and nature of a deductible must be arranged with an insurance policy provider before a deal can be made, but it will always need to be paid before the insurance company provides funds for your claim. As an example of how a deductible works, assume you are in a $2,000 accident. You arranged before that your deductible will be $100, so you must pay that $100 before your insurance company will pay the other $1,900. Deductibles range widely in size and percentage, and they are related to the size of a car insurance premium, which is the amount you pay per month.

Keeping A Deductible Low

Car insurance quotes can be misleading, as they often don't reflect deductible size. It is possible to secure a lower deductible by agreeing to pay a higher monthly premium on your overall insurance. There are pros and cons to this approach. If a driver is relatively inexperienced or elderly, and he can predict a series of minor dings and dents, it is reasonable for him to shoot for a higher premium and a low deductible. If the policy is covering a safe and experienced driver, then chances are good that the driver won't need to pay a deductible often, so the deductible can be higher and the premium lower.

Be Prepared

In choosing a deductible, it is paramount to choose one that you can realistically pay at any time. Setting aside an emergency fund that can cover this amount is a wise decision. You can't predict crashes and damages, and a lack of funds for a deductible means your insurance company won't cover any repairs-which means you'll owe even more money. Before you choose the amount of your deductible, consider your proven track record, foreseeable mishaps and amount of savings. Once you take all these factors into account, you'll be more likely to choose a good policy.