How Does a Car Insurance Deductible Work?
Nearly every state requires drivers to carry a minimum amount of auto insurance coverage. And every insurance policy is made up of two costs: a premium and deductible. Learn how your car insurance deductible works, so you can choose a policy that meets your needs and budget.
What is a deductible in auto insurance?
When you purchase car insurance, you are essentially entering into a contract with the insurance company. In exchange for your premium payments (the amount you pay on a monthly, annual or bi-annual basis), the company agrees to pay for any damages that you incur while driving in accordance with your policy terms. However, most insurance policies come with a deductible. So, what is a deductible in auto insurance?
A deductible is the amount of money you are responsible for paying out of pocket after an accident before the insurance company steps in and pays the rest. You choose your deductible amount at the start of your policy agreement, which can range in price, but most commonly is $500 or $1,000. It’s important to choose an amount you would be comfortable paying out-of-pocket in the event of an accident.