7 Things You Should Know About Insurance Deductibles
Hartford: Alaina Tweddale and Manisha Pradhan
Have you ever wondered how deductibles work when it comes to homeowners and auto insurance? Many people do – this is why we’ve put together this guide to help you understand the basics of deductibles and how to choose the best one for you and your situation.
1. What exactly is an insurance deductible?
A deductible is the portion of the costs that you pay in a claim when you need to get your car repaired after an accident or your home repaired after a loss. The deductible amount will be paid by you specific to your property that’s damaged, whether it’s your car or your home, so you should always choose a deductible that you’ll be comfortable paying.
2. How does my deductible work?
The way deductibles work varies, based on whether you’re talking about auto policies or home policies.
Auto Insurance
If you’re involved in a car accident and your vehicle can be repaired, your insurance company will pay the auto body shop for the damages, minus your deductible. You’ll then pay the auto body shop your deductible amount when your vehicle is completely repaired.
If you’re involved in an accident where your vehicle is totaled — that is, your insurer believes that the cost to repair your vehicle would be more than the value of the vehicle itself — your insurance provider will pay you the current value of your vehicle, minus your deductible.
For example, say you’re involved in a car accident and the damages are estimated to be $2,000 and you carry a $500 deductible. Your insurance company will pay the body shop $1,500, that it, the total damages minus your deductible, to repair your car. Once it’s fully repaired, you’ll then pay the body shop the $500 deductible to pick up your car.
Homeowner’s Insurance
Your insurance company will pay you directly for the damages of your loss, minus your deductible, which you will then use to pay a contractor to repair your home. For example, say that you have experienced a kitchen fire, resulting in a $50,000 loss and you carry a $1,000 deductible. Your insurance company will pay you $49,000, the total damages minus your deductible. When the $50,000 in damages are repaired, you’ll pay for them using the $49,000 from the insurance company plus $1,000 of your own funds, which represents the deductible amount.
3. What options do I have when it comes to my deductible and filing a claim?
You have the right to choose whether or not to file an insurance claim if you have a loss. Typically, people will file claims on larger losses and repair smaller losses on their own.
For example, say that you’re involved in an accident and the damage to your vehicle is $15,000 and you carry a $500 deductible. You would probably file a claim with your insurance provider to repair these damages; if so, you would pay the $500 deductible once it’s repaired.
Now imagine that the damages to your vehicle were only $200 and you have that same $500 deductible. In most cases, a person would choose to pay the $200 out of pocket to repair their car, rather than filing a claim with their insurer. READ FULL ARTICLE