What is a deductible?
Collision and Comprehensive coverages often include a "Deductible." What is a deductible? A deductible is the amount you would pay out-of-pocket, up front for the damage to your car.
To a certain degree, you have control over your deductible amount. Usually the higher the deductible you choose, the lower your premium for Collision and Comprehensive coverage will be. Typical deductibles range between $100 and $1,500.
The amount of damage over your deductible will typically be covered up to the actual cash value ("ACV") of your car. Note, your car's actual cash value takes into account the price of your car when you purchased it, as well as the age and condition it's in at the time of the accident.
How do I choose a deductible?
It's important to choose a deductible that you fits your financial situation. On one hand, choosing a higher deductible may help reduce the amount you pay for Collision and Comprehensive. On the other hand, if you don't have enough money to cover your deductible in the event that there's covered damage to your vehicle, you may have trouble getting your car fixed.
To choose the right amount, think about how much you could pay out-of-pocket to have your car fixed without experiencing a lot of financial stress in your life. You'll want to take into account how much you spend on rent/mortgage, groceries, daycare, etc. along with your savings and credit accounts.
Real life scenario:
You have a collision claim that causes $6,000 in damage to your car, which has an actual cash value of $20,000. When you purchased your collision coverage, you selected a $500.00 deductible. This means you are responsible for paying the first $500.00 of the damages and your insurance carrier will cover the remaining $5,500 in damages.
Have questions about your current deductible or adjusting it? Give us a call at 1-877-GO-DIRECT (1-877-463-4732) or stop by a Direct Auto & Life Insurance location near you.