If you are shopping for new car insurance (or updating your current policy), one of the factors to consider when getting a quote is choosing the deductible amount. It might seem enticing to pick the highest deductible since that often equates to a lower monthly premium. But saving a few bucks in the short term might mean you pay more in the long term. Let’s break down how car insurance deductibles work, with the help of our friends at The Zebra.
Your car insurance deductible is the amount of money you have to pay if something happens to your car before your insurance kicks in, after a covered event (such as a crash, theft or weather damage). For example, if your car needs $2,000 in repairs and your deductible is $500, you will have to pay $500 and your insurer will cover the remaining $1,500. Many insurance providers (including Metromile) will take the deductible out of the indemnity payment (the money you receive from a claim), or the deductible will be paid directly to a repair facility if you choose to fix your car. Car insurance deductibles work differently than other types of insurance deductibles, such as health insurance. Your health insurance deductible applies across the calendar year, but your car insurance deductible will be applied for each claim you file. So if you submit two car insurance claims in a year, you will have to pay your deductible each time.
So how do you choose the right deductible amount for your needs? If you choose a higher amount, there is less chance that the insurer will have to help pay for damage, so your monthly premium might be lower. If you choose a lower deductible, your premium might be higher, but that means you will have to spend less money in the event that something happens to your car. The Zebra advises that you shouldn’t just choose a high deductible in hopes that you will never have to make a claim. There are always things beyond our control (like vandalism and bad weather), so if something happens and you can’t pay for repairs, that’s bad news.
It is important to note that no matter what deductible amount you choose, you still will only be covered for expenses that your insurance policy covers. If you only have Liability coverage, the only expenses that are covered are the damages to the other driver’s vehicle and bodily injury claims from the other driver or passengers in the event that you are at fault in a car crash. If you have Comprehensive and Collision coverage, which are sold together, then you will also be covered for damages to your own car (Collision), as well as damages caused by non-collision such as theft or natural disaster (Comprehensive). The exact things that are covered vary by insurance carrier and state, so make sure to check with the carrier to see exactly what is included (Metromile customers can check the policy contract). You can choose the deductible amount for each type of coverage, so if you you think you are a safe driver, The Zebra suggests that it might be OK to raise the amount on Collision coverage (where you can often prevent a crash) versus Comprehensive (where the events are typically out of our control).
Now that you have the information to choose the right deductible amount for your needs, try getting a quick, free quote to see how much you could save with Metromile’s per-mile car insurance offering!