Deductible refers to the car insurance policy holder’s share of loss or damage suffered by the object insured. The car owner must shell out this amount toward repair or replacement of the vehicle before claiming the coverage amount from the insurance provider. It is the sum deducted from the insurer’s obligation and transferred to the policy holder.
Also known as excess, this is imposed on the automobile insurance policy holder to ensure fewer frivolous claims. A policy with $600 deductible will pay only if the claim exceeds this amount. Upon $750 damage to the car, the insured must pay the deductible (i.e., $600) and the company will pay the balance $150. Another accident or mishap on the next day will again require $600 payment by the policy holder. This financial burden encourages safe driving and reduces petty claims. The deductible, combined with a No Claim Bonus for model customers, ensures safer driving, fewer claims, less administration cost, and fewer disputes between car owners.
It also reduces chances of insurance fraud. Unlimited claims on a car insurance policy without any liability on the insured may lead to false accidents and fake claims. This condition ensures taht the car owner shares the financial loss every time a claim is filed. There’s less incentive for filing fake claims.
This requirement also imposes a condition of mandatory savings on part of the owner of the vehicle. Not having the deductible in hand will render the policy useless, since no claims will be processed without payment of the deductible.
This requirement, imposed by insurance companies, offers many advantages for car owners, as well. Drivers can opt for a higher deductible and drive safely to avoid paying this sum to the company. The higher commitment will reduce premiums and help owners enjoy better savings. The deductible is connected to mishaps. No mishap and no excess will be payable. On the other hand, premiums are connected with time. Premiums are payable even if no accident takes place and no claim is made.
Offering to pay double the standard excess and reducing premium will ensure higher savings for the car owner. Deductible is an expense that may occur in future. This is preferable to the premium amount, which is an immediate expense. A good driver can save a lot of money over a long period by simply driving safer and enjoying lower premiums on the policy with a higher commitment.
Car insurance companies specify this sum as a specific dollar amount, as a percentage of claim amounts, or with reference to time. The first option is most common, the second is used sparingly, and the third option isn’t common in auto insurance.