Insurance deductibles explained
When shopping around for the right car insurance, the term “deductible” is bound to come up quite frequently. This is the amount you will be responsible to pay “out of pocket” before your insurance kicks in to cover additional costs.
Your car insurance deductible will likely impact your insurance rate and your overall ability to afford any damage done to your vehicle.
Understanding deductibles is critical. Auto insurance coverage mandatory for all drivers and everything from insurance premiums to the cost of damage repair is skyrocketing.
Keep reading to learn more about deductibles and what the best option might be for you.
Do All Policies Have a Deductible?
Whether or not your auto insurance policy includes a deductible depends on the type of policy you purchase.
While Arizona mandates all drivers maintain a minimum of liability insurance, these policies do not include deductibles. Such minimal coverage is only meant to provide property and personal injury protection in the event you are financially responsible for an accident.
If you are interested in having a deductible included in your policy, they are generally present in collision and comprehensive coverage. In these policies, the following benefits are available:
- Collision coverage repairs or replaces your vehicle if you strike another car or object
- Comprehensive coverage repairs or replaces your vehicle in the event of circumstances such as theft, vandalism, fire, etc.
- When a driver adds collision and comprehensive coverage together, they are considered to have “full coverage”
If you have a policy with a deductible, the next step is understanding what you have to pay if you file a claim and how those claims will affect your overall insurance rates.
When Do You Pay Deductible Car Insurance?
Let’s work with an example scenario.
We will assume that while parking your vehicle you struck a fire hydrant. After the accident, you will file a claim with your insurance company to and get an estimate on your car to assess the amount of money needed to cover the damages. In this scenario, the damage to your car is around $5,000.
If you have a $500 deductible on your collision policy, you will need to pay $500 toward fixing your car. Your insurance covers the remaining $4,500 needed for the repair.
The Financial Impact of Having Deductibles
When looking for a deductible plan or after paying your rate after filing a claim, there are many situations to consider to ensure your rates stay affordable.
1. Deductible Affordability
Many individuals will opt for high-deductible plants to minimize premiums, however, it is critical to choose a deductible amount that you can realistically afford. If your deductible is too high and you suffer an accident, you could be in an even worse financial position. This is especially true if your policy coverage is less than the overall value of your car as, in the event of a crash, you will be responsible for an even bigger sum of money.
2. Deductible Impact on Premium
There is an inverse relationship between your car insurance deductible and your premium. This means that raising your deductible actually lowers your insurance rate. So, if you can afford either rate of auto insurance deductibles, $500 or $1000, choosing the $1000 option will save you money on your premium in the long run.
3. How Claims Impact Premiums
Those with a recent history of filing an insurance claim generally pay higher rates. Claims made through a collision policy in 2017 led to a 43% average premium increase. For this reason, many people prefer to pay for minor damage out of pocket.
What about claims you file that are not truly your fault? The Arizona legislature has addressed this concern. Arizona’s 20-263 provisions prohibit insurers from increasing rates when an accident is “not caused or significantly contributed to” by the insured.
4. Deductibles When Financing a Car
When you are leasing or making payments toward purchasing your car, there may be deductible restrictions. Lenders need to ensure their investments are protected and often require that the deductible be no greater than $500. Similarly, agreements on leased vehicles may also require a higher grade of insurance to cover any unexpected damage.
5. No Deductible Options
Arizona Title 20 (under 20-264) requires insurers to offer an option for coverage of commonly damaged parts without a deductible. While this statute requires that insurers make a zero deductible option available for purchase, coverage only applies only to windshield, exterior glass, and exterior light damage.
Calculating Your Premium
While having a higher or lower deductible will alter your insurance costs, there are several other factors that are used to calculate your final rate.
Your insurer may consider your age, past driving history, history of insurance claims, the replacement value of the vehicle and more. Where you live is also a critical factor. Rates tend to rise in larger urban areas for reasons such as increased traffic volume and likelihood of theft.
|Arizona Locality||Average Rate (Full Coverage)|
|Lake Havasu City||$2955.72|
Agency Provides Auto Insurance in Casa Grande
Recent data from Arizona insurers shows the average annual premium for full coverage ranges from roughly $2,264 to nearly $5,000 annually.
When shopping for car insurance, it is recommended that you seek help from a professional insurance agent to keep these costs as low as possible.
The Gebhardt Insurance Group in Casa Grande will be sure you save money and help you fully understand your insurance coverages.
As an independent agency, we are deeply rooted in the local community. Our agents are experts at identifying policy options that offer tremendous savings and excellent coverage. We encourage you to contact our office today at (520) 836-3244).