Everything You Need To Know About Deductible Insurance

A deductible is one of the powerful elements of insurance. But it’s also one of the most misunderstood concepts. Canadian law makes it mandatory for all vehicle owners to have third-party liability insurance. However, it is always advisable to have additional coverage for your own safety as well. 

Here is where trusted insurance brokers like Surex come into the picture. They can help you choose the best policy based on your requirements. Visit https://www.surex.com/Insurance/auto-car/ontario  for more information. 

Deductible insurance meaning 

The meaning of deductible in insurance is the amount that the policyholder is responsible for covering towards an insured loss. The insurance company calculates the amount depending on the amount set when signing up for the insurance. This amount is deducted by the company from the claim amount. 

In other words, the deductible impacts the amount of vehicle insurance claims depending on the value chosen when signing up for the policy. It may also reduce the insurance premium of your car. 

The deduction’s value depends on the risk percentage predefined between insurers and policyholders. It can be either a specific percentage or monetary value. All this info is mentioned in the policies.

When and how is the value of deductible insurance determined? 

A deductible is an amount the individual pays out of their pocket if they file a claim and are either found partially or fully at fault. Deductible value helps cover the damage cost of the vehicle that has met an accident. Let’s understand this better with the help of an example. 

Let’s say the value of your deductible is $500. If you get either a fully or partially at-fault collision and the repair cost of your vehicle is around $1000. In this case, you’ll have to bear $500, and the insurance company bears the rest. 

Exceptions – If the individual isn’t entirely at fault for the car damage or collision, there are good chances they’ll be saved from bearing a deductible. The insurance company covers the entire costs associated with the claim. 

Types of auto insurance deductibles

The two major types of insurance deductibles for cars are partial and full deductibles.

A collision deductible is applied to collision insurance which covers accidental damage caused to the car. The amount paid by the insurance holder depends on whether they are responsible for the accident – 

  • Partial amount – If you are partially responsible for the damage, you’ll bear half the deductible. 
  • Full amount – The party would bear the full amount of the deductible if they were fully responsible for the accident or damage.

Under what conditions a deductible applies? 

Deductible applies to the car in case of either comprehensive or collision coverage. The liability coverage protects the individual if they injure a person with their vehicle. However, a deductible isn’t applicable if the injured person sues them. If the person carries both comprehensive and collision coverage, they must choose amounts for deductible coverage. The deductible amounts can be similar or different. 

How to choose your insurance deductible amount

Choosing the deductible amount is one of the major financial decisions. It lays a significant impact on the policy amount that you have to pay. It is important to consider the following points when deciding the amount of your policy’s deductible – 

  • Location – It lays a huge impact on a deductible’s cost. Individuals residing in regions with a high number of accidents or higher traffic volume can reap the benefits of a lower deductible as the chances of encountering an accident are high.  
  • Affordability or financial condition – You need to consider your budget to determine the deductible amount you can afford. Take the deductible risk only if you can afford to bear the “loss”. 
  • Frequency of accidents or claims – Individuals who submit many claims or get into accidents frequently can sign up for a low deductible amount. It saves them from paying out the amount every so often. 

Impact of deductible amount on the car’s insurance premium

Now that you know about the deductible insurance meaning and how to find the right amount, the next thing you must understand is the impact of the deductible on the vehicle’s insurance premium. 

A high amount of deductible means low car insurance premiums. 

You could reduce the amount of your car’s insurance premium by choosing a high deductible when signing up for the insurance policy. 

But when it comes to deductibles, it’s important to consider what you can easily handle – collision or comprehensive deductible. Is $1000 doable? Or can you only afford $500 out of your savings? 

When comparing the rates for car insurance, check the deductible amount and how much it impacts your insurance premium quotes. If you choose collision deductible, the financial burden will lie on your shoulders. So before signing the document, make sure to determine your affordability. If you have a tight budget or your driving skills are weak/rash, sign up for a low deductible amount.

Increasing insurance deductibles helps in saving money on the policy. It depends on the specific policy and circumstances. If you increase the amount of your deductible, you’ll be responsible for paying the potential claim. 

Also, chances are you may end up spending more on the claim rolls. A high deductible can have a negative impact if the claim amount is low. 

Deductible meaning in insurance 101 — Endnote 

So this was all about deductible insurance meaning and its impact on your insurance premium. A deductible is one of the important elements of car insurance plans. Hence, it should be planned carefully considering your affordability. The insurance agency is liable for paying only that claim amount exceeding the deductible. 

One of the major points of a deductible is that it is to be paid only when the insurance policyholder files a claim which includes a deductible. The insurance company outlines the deductible amount you must pay fully or partially at-fault vehicle vandalism, theft, or accident. On the safe side, avoid filing for the claims frequently and drive cautiously. It will save you from the financial fix whenever you file a claim. 

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