Car Insurance

What is a deductible? A deductible is the amount you pay before
your insurance carrier pays any claim. Insurance companies offer
deductibles on certain coverage in insurance policies as a method
of sharing risk with the people they insure. Insurers believe
that if you, the insured, share some of the risk you will likely
be more careful and try to minimize the possibility of a claim.
Since you, the insured, pay your share before the company is
liable for their share, smaller potential claims are often
avoided.

What is the right deductible to carry? It depends not only on the
particular coverage but further on your willingness and ability
to pay the specified amount in the event of a claim. In other
words, select a deductible based on your tolerance for risk. Your
agent should be able to help you choose a deductible that is
right for you. Often, the decision is an easy one as insurers may
only offer a few choices in deductible for a specific coverage.

Typically, which type of coverage offers a deductible? The most
common type of coverage with a deductible is physical damage
(also known as comprehensive and collision). This is coverage for
your vehicle itself. For damage caused whether or not at fault.
In many cases if you have borrowed money to purchase your vehicle
through a bank or credit union, the lien holder will require that
you carry this coverage. This coverage is usually required in the
event any damage occurs while you are still paying for the
vehicle. Typical physical damage deductibles are $250, $500, and
$1000. Higher deductibles will reduce the cost of your insurance
by lowering your premiums. When evaluating higher deductibles, it
is a good idea to consider carefully your circumstances. Ask your
insurance provider for quotes for various deductibles, and
analyze them carefully before making a decision. The higher the
deductible is on a specific coverage, the lower the premium for
that coverage. This is a great way to save on the total cost of
your policy. For example, increasing your deductible from $250 to
$500 could reduce the physical damage portion of your policy from
15% to 30% depending on your insurance carrier.

Another type of coverage typically offered with a deductible is
Personal Injury Protection or PIP. This coverage is also
sometimes referred to as No Fault. “No Fault” insurance is a
general term that is used to describe any auto insurance system
that not only requires drivers to carry insurance for their own
protection, and places limitations on their ability to sue other
drivers for damages. In an accident, under no fault laws, your
auto insurance company will pay for your damages (up to your
policy limits), regardless of whom was at fault for the accident.
Any other drivers involved will be covered by their auto
insurance policies. Not every state requires this type of
coverage. No Fault is required if you live in: Florida, Hawaii,
Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey,
New York, North Dakota, Pennsylvania, Utah or D.C.

No Fault is usually offered with or without the option of a
deductible. You can choose to purchase this coverage with a
deductible if you want to absorb some of the risk as with other
coverage such as physical damage. As with physical damage, the
higher the deductible, the lower the premium on the No Fault
portion of your policy. Your agent may recommend taking a
deductible on your No Fault if you have health coverage elsewhere
since you can only make one claim on any one injury. Some health
insurance policies exclude automobile accident so it may be wise
to check with your healthcare provider to make sure you are
covered if you decide to go with a deductible. Common deductibles
options on No Fault are $0, $250, $500, and $1000.