When you are young, you are probably on a budget. Yet, if you are a driver, you must factor your auto insurance premiums into your costs. Your premium will be a regular cost. However, you'll also face residual costs within your policy, such as deductibles. Many new drivers don't realize that they might have to pay this cost in the event of a policy claim. How does your deductible work within your greater insurance policy?
Deductibles are a two-way street. In some ways, they are an extra cost you must bear following vehicle damage. However, they can also help you save on your auto insurance.
What's A Deductible?
Your deductible is a deduction from the total cost your car insurer will pay for a claim. In other words, it's a cost, defined in your policy, that you will pay for repairs.
When you take your damaged vehicle to a mechanic, you'll probably pay the deductible cost. Your insurer will then pay the rest of a claim's cost. Let's say you have a damage deductible of $1,000. But, after a wreck, your car sustains $3,000 in damage. You will pay the $1,000 deductible cost and your policy will pay the remaining $2,000 in the claim ($3,000 - $1,000 = $2,000).
Generally, deductibles only apply to damage your own vehicle sustains. If you cause damage to someone else, you usually won't have to pay this cost.
The Benefits Of Your Deductible
Your insurer will likely recommend that you carry only the deductible you can afford. For example, if you have a $1,000 deductible, make sure you can afford to pay this cost in the event of a wreck. That's money out of your savings, after all. If you can't pay $1,000, you might ask your insurer to include a lower deductible, such as $500 or $750. Within your deductible, you'll often have a lot more control over where your money goes.
However, there's a catch to carrying lower deductibles. Often, the lower your deductible, the higher your premium cost. That's because by lowering your deductible, you shift more of a cost risk onto your insurer. Similarly, by raising the deductible, you take on more of the cost yourself. That could lead to rate reductions.
Talk to your Quantum Alliance agent when signing up for your deductible. Ask them what values they offer, and when you must pay the cost. They'll help you decide how to balance your deductible with your rates for optimal coverage.