First Time Drivers: How Deductibles Work

As a first-time driver obtaining car insurance for the first time, all of the options and language surrounding getting car insurance can easily become overwhelming. Here is a quick guide to help you understand exactly what a deductible is, how it works, and how it affects your premium. 

What Is A Deductible?

Depending on the type of insurance that you purchase, your insurance provider will cover the damage that your vehicle sustains in an auto accident via your collision coverage or due to a natural disaster or other unforeseen circumstance via your comprehensive coverage. 

However, generally before your insurance company will pay anything on a claim, they require  you to pay a certain amount out of pocket towards the repairs. This amount is referred to as a deductible 

How Does A Deductible Work?

When you file a claim, your insurance company will determine the cost to repair or replace your vehicle. Once they do that, you will be required to pay out of your own pocket the agreed upon deductible before your insurance company will pay the rest of the bill. 

Sometimes you have to pay the deductible directly to your insurance company when your vehicle is repaired. Other times, you pay your deductible directly to the shop repairing your vehicle and then your insurance company pays the rest of the bill.

How Does A Deductible Affect Your Premium?

When you sign up for your insurance coverage, you get to determine what type of deductible that you want to pay if your vehicle is damaged. You can choose a small amount, such as $100, or you can choose a large amount, such as $1,000 dollars.

Most insurance companies will offer you different increments that you can choose from for your deductible. As a general rule, if you choose a lower deductible, you can expect to pay a higher premium since you are relying on your insurance company to pay a large portion of any potential repair bills. If you choose a larger deductible, you can generally expect to pay a lower premium since you are picking up more of the cost of any future repair bills. 

When choosing what level of deductible you want to pay when creating your insurance agreement, you need to make sure that you can pay the agreed-upon deductible should anything happen to your vehicle. Yes, a higher deductible may lower your insurance premium, but that will not do you much good if you can't afford to pay it. Make sure you can pay your deductible and your premium. 

For more information about insurance, deductibles, and premiums, contact an insurance agent like Graber Insurance or others locally.