Deductibles Explained

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The amount of your deductible is one of the biggest factors in the cost of your car insurance. As such, it’s important to understand what a deductible is and how it factors in to your insurance. In simple terms, the deductible on a policy is the amount of money you have to cover before the insurance company will step in and cover the rest. The idea behind the deductible, and how it affects your premium payment, is slightly more complicated.

When the insurance company pledges to compensate you for damages in case of an accident, you become a monetary risk in their eyes. Requiring you to pay a part of that damage forces you to share in the risk. Since it’s your money on the line, insurance companies figure you’ll drive safely to prevent accidents. This system also discourages smaller claims for damage. Why try to get the insurance company to pay for $300 of damage when you have to pay $250 for it to even start working?

The relationship between your deductible and your premium payments is simple. If you take a higher deductible – which means you shoulder more risk – your monthly premium payment will be lower. Conversely, taking a lower deductible will increase your monthly premium payment. To choose the right deductible, you’ll have to decide how much you can comfortably pay each month in premiums, and the amount of money you’re able to set aside to cover your deductible in case of an emergency.

Luckily, evaluating your options is a relatively simple process. Car Insurance companies generally offer two or three levels of deductibles, commonly set at $250, $500, and $1,000. A NY car insurance quote from an insurance company will generally offer you a premium amount for each deductible, making the options easy to consider.

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