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Car insurance

What are deductibles?

Your deductible is the amount of money you agree to pay out of your own pocket if you happen to make an insurance claim. Your insurance company pays the rest of the claim amount.

How does it work out?

Here’s an example:

You’ve agreed to a $500 deductible with your insurance company. Let’s say it costs $1,250 to fix your car after an accident and you file a claim. You will have to pitch in $500, and the insurance company will pay the rest, $750.

If you pick a higher deductible, your insurance costs are usually a bit lower, depending on the policy.

You decide what works best for your budget: You can risk shelling out a bigger deductible in case of a claim and save some money on your premiums. Or if you think you won’t be able to pay up at claim time, you can pay the slightly higher monthly premiums and opt for a lower deductible.

The smart thing to do is find a balance between the 2 choices.

When do I pay the deductible?

You only have to pay the deductible if you claim. But remember, it’s not a one-time thing. You will be asked to pay the deductible again for a new claim.

In some cases you won’t need to pay the deductible. It all depends on whether the insurance company determines you’re ‘at fault’ for the collision. The deductible amount will vary based on whether you’re 100% at fault, not at fault, or partially at fault.

If your car is stolen you will be considered at fault for the purposes of the claim and you will have to pay the deductible. So make sure your deductible isn’t MORE than the value of your car!

Hang on, what if the crash isn’t my fault?

If your car is damaged in a crash that is proved to be someone else’s fault, you won’t have to pay the deductible. The other driver’s insurance should cover the entire cost of the repairs.


Honor joined ingenie in 2014 and is in charge of words on the Young Driver's Guide and blog. She started learning to drive last year, at the age of 24.