All Risk Insurance Group, Inc., clears up any confusion you may have before the new year

It happens to everyone. You are buying car insurance and your insurer asks you to choose a deductible for your physical damage coverage. And suddenly you feel like you did when you had that dream about being in high school and not having studied for the test. We get it, but it does not have to be this way. So, before we ring in 2021, with whatever challenges that might bring, All Risk Insurance of Boca Raton wanted to gift you everything you need to know about your car insurance deductible, so it is at least one less thing you have to think about moving forward.

The deductible is the amount you agree to pay towards the cost of a claim, which means it is important to choose thoughtfully. The amount you choose impacts both how much you will pay and your ability to receive coverage at all. The following are the ways and reasons deductibles impact your policy.

What else defines a “Deductible?”

When your car insurance contains collision and comprehensive damage coverage, then the policy agrees to pay for a certain amount of damage inflicted on your car. Most policies, however, do not cover 100% of the costs of your damage. They will instead share the cost of the claim with you, the insured driver, by assigning a deductible.

So the deductible is the amount of money you agree to pay, as the policyholder, towards the cost of the claim. The insurer generally offers several choices for the amount the policyholder can choose; be it $500, $1,000, $2,500 or some similar amount.

So, for example, if you back into a tree and cause damage to your car, you will then be responsible for the deductible towards the costs for repairs. If your car has $3,000 in damages, and you have a $500 deductible, then you will be required to pay $500 while your insurer pays the remaining $2,500.

How do you know for certain if you are choosing the right deductible?

There are several considerations which you should review carefully before choosing your policy’s deductible…

The Cost is a Commitment – Everyone should remember that the auto insurance deductible is the cost they are expected to pay. If you are not able to cover a $5,000 deductible if/when a worst-case scenario happens, you should choose $2,000, or whatever amount you know you can cover if it comes to that.

Lower Premium Cost = Higher Deductible – If you choose a higher deductible, your monthly premium costs should go down because you are removing some of the cost risk from the burden of the insurer. This can be viewed as lowering your monthly expenses, but it still means you have to pay more in the cases of vehicle damage. Conversely, slightly higher premium costs may actually prove more budget-friendly in the future.

When the Damage is Minimal – Something else to consider is if the cost of damage is less than the value of your deductible, your insurer won’t pay anything at all. For example, if you have a minor incident with your vehicle that only costs $750 to repair, but your deductible is $1,000, you will ultimately pay for all the damage yourself.

Self-Awareness is Key – It is all tricky and something of a gamble but knowing your personal driving history may help best determine what makes the most economic sense for you. And you can often update your deductibles, both during your policy term and when it comes time to renew your coverage.

Why now?

The New Year is a perfect time to review your existing damage deductibles and see if you can still reasonably afford them. How much driving have you done during this year of intermittent lockdowns and rampant remote employment, and how much do you think you will be driving next year as we begin to ramp back to “normal?” That will help determine if you need to reduce or increase coverage.

Or feel free to call the professional staff at All Risk Insurance of Boca Raton! We are here to discuss all your insurance needs. Feel free to contact us to discuss what type of policies (and deductibles) are best for you and let’s make it a wonderful new year!

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