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Insurance Deductible?

By December 22, 2011June 8th, 2020Insurance

What is an insurance policy deductible?


A deductible is an amount that is selected by an insured if their automobile insurance policy includes physical damage coverage (comprehensive/collision), which represents the amount of money the insured agrees to pay to repair damages to their vehicle before the insurance company has any responsibility to cover the rest of the claim. For example, if an insured had selected a $500 deductible for comprehensive coverage, in a covered loss, the insured will first pay the $500 and only then will the insurance company consider additional payment for any damage that exceeds the $500 that you have paid. Deductibles only apply to physical damage coverage, or comprehensive and collision coverage. It does not apply for liability or medical payment coverage.


Why would an insured choose a deductible?


By selecting a deductible, an insured accepts the financial responsibility for some of the cost of repairing the vehicle in a covered claim, up to the amount of the deductible. In return, the insurance company charges a lower insurance premium since they are not responsible for the entire loss amount in a covered claim. That being said, the higher the deductible, the lower your insurance premium will be.


In some instances, you might find yourself in a situation where it is better to pay for the damage yourself instead of paying the deductible and getting the insurance company involved. For example, let’s say an auto repair will cost you $450 and you have a $500 deductible, you are better off personally paying that repair and not get the insurance company involved. Without reporting to the insurance company about a claim like that, it eliminates the company of the time spent investigating and administrative costs, thus allowing for a lower premium.


For example, if an insured loss is less than the deductible, some of the administrative costs that may be avoided by the insurance company include:


          The labor cost for the carrier to take the claim report and set up a file.

          The cost to have an inspector examine the vehicle and write up an estimate.

          The cost to prepare and mail paperwork necessary to resolve the claim.

          The cost to comply with state regulations on claims handling.

          The cost for the adjuster to collect the facts of loss, review documentation, determine liability and damages.

          The cost to issue and mail payments.

          The administrative cost to manage payments and the required financial documentation.


There are several ways you can save money on your auto insurance. Insurance Incorporated helps communities throughout Southern California, such as, Riverside, Los Angeles, Orange County, Inland Empire, etc. Contact us for any question you may have related to insurance!

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