What does a $500 car insurance deductible mean?

A deductible typically applies to the collision and comprehensive portions of your auto insurance policy when you have full coverage car insurance.These two insurance coverage pay for damage to your car regardless of whether you or someone else caused the need for the repairs.When your insurance coverage contains a deductible, you must pay the deductible before your insurance pays the rest of the repair bill or pays you for the value of your totaled car.To find a car insurance policy that includes collision insurance, you can use a comparison tool to find the policy so that you can choose a deductible that meets your needs. Enter your zip to get started right here!

Car Insurance Deductibles

Deductibles allow you to assume some of the risk of getting into a car accident.As a result, your insurance company lowers or raises your premiums, according to the dollar amount of risk you are willing to assume.For example, someone with a deductible of $100 would pay more per month than someone with a $500 deductible, assuming both individuals had the same insurance policy.

Comprehensive and collision insurance policies have deductibles because they pay for damage to your car.

Liability policies do not have deductibles because they only pay for the other person’s accident related expenses.

• Comprehensive – Comprehensive insurance pays for damage to your vehicle that is not the result of a car accident or incident. Comprehensive policies typically cover items like hail damage, falling tree branches, and vandalism
• Collision – Collision insurance pays for the replacement or repairs to your vehicle after you’ve been involved in an accident that was deemed to be your fault

It is important to note that states only require liability insurance coverage.

How Deductibles Work

When you get into a car accident or something happens to your car while you’re not driving, you must file a claim with your insurance company.If the company approves your claim, they will pay for the repairs to your car minus your deductible, assuming your car can be repaired for less than it is worth.

If your car is totaled via an accident, your insurance company will determine the value of your car just prior to the accident.

Then, they will write you a check for the value of your car minus your deductible.For example, if are involved in an accident that was your fault that causes $5,000 worth of damage and your deductible is $500, your car insurance company will pay $4,500 for the repairs. You are responsible for paying $500.If your $8,000 car is totaled in an accident that was your fault and you file a claim that is approved, your insurance company will write you a check for the amount your car is worth less the amount of your deductible.In this instance, with a $500 deductible, you would receive a check for $7,500

(Read more: Is car insurance tax deductible?)

Controlling Your Premiums via Your Deductible

If you need collision insurance as well as liability, you can lower your premiums by raising your deductible.To do this, figure out the amount of money you can always afford to pay if you are suddenly in a car accident.For most drivers, that number is going to be $500, and raising your deductible from $100 or $200 to $500 will lower your monthly premiums because you will be assuming more of the responsibility of getting into an auto accident.If you need a car insurance policy with a higher or lower deductible or need to find a policy that includes collision and comprehensive insurance, start shopping online.Check out our FREE quotes comparison tool below! Just enter your zip code to start!

Case Studies: Understanding Car Insurance Deductibles

Case Study 1: The $500 Repair Bill

John had a car insurance policy with a $500 deductible. Unfortunately, he was involved in an accident that caused $2,000 worth of damage to his car. Since his deductible was $500, John had to pay that amount out of pocket, and his insurance company covered the remaining $1,500.

This deductible amount allowed John to lower his monthly premiums, but he had to be prepared for higher upfront costs in the event of an accident.

Case Study 2: Adjusting the Deductible

Maria had a $500 deductible on her car insurance policy. However, she found that she could lower her monthly premiums by increasing her deductible to $1,000. Although this meant she would have to pay more out of pocket in the event of an accident, Maria decided it was a financially viable option for her.

By adjusting her deductible, she was able to find a balance between affordable premiums and manageable upfront costs.

Case Study 3: Liability Policy Exemption

David had a liability-only car insurance policy, which did not have a deductible. One day, he accidentally rear-ended another vehicle, causing damage to both cars. Since David only had liability coverage, his insurance did not cover the repairs for his own car. He had to pay for the repairs entirely out of pocket.

This case study highlights the importance of understanding the coverage limitations of different policy types.