Auto insurance is a financial safeguard that protects us in times of unexpected incidents and mishaps on the road. But one of the most important aspects of auto insurance that often puzzles policyholders is the deductible.
No need to worry though, it’s easy to understand what they are, how they function and the significance of their role in determining insurance premiums and coverage.
Whether you’re a seasoned driver or a new car owner, understanding deductibles is essential for making informed decisions about your auto insurance policy.
What is an auto insurance deductible?
An auto insurance deductible is the amount you pay out of pocket before your insurance provider steps in to cover the remaining expenses related to a claim. Essentially, it’s your share of the costs when you file an insurance claim.
When you’re involved in an incident or your vehicle sustains damage, you’ll need to pay your deductible before your insurance coverage kicks in.
For instance, if your deductible is $500 and the total repair cost is $2,000, you’ll pay $500, and your insurer will cover the remaining $1,500.
Types of auto insurance deductibles
Collision Deductible: Collision deductible applies when your vehicle is involved in a collision with another vehicle or object, regardless of who is at fault. The deductible covers damage caused by accidents such as fender benders and collisions with stationary objects like trees or lampposts.
Comprehensive Deductible: Comprehensive deductible comes into play when your vehicle suffers non-collision damage. This includes incidents like theft, vandalism, hail damage and encounters with wildlife. Comprehensive coverage offers protection against a wide range of perils beyond collisions.
Uninsured Motorist Deductible: This deductible applies if you’re involved in an accident with an uninsured driver and your insurance policy includes coverage for such situations. It ensures that you’re not left with the full financial burden when the responsible party lacks sufficient coverage.
Direct Compensation Property Damage (DCPD) Deductible: Most policyholders do not have a deductible for DCPD. However, in Alberta and Ontario your coverage might be split if you’re found partially at-fault for an accident. If you are found 30% at fault for a collision, you will have to pay 30% of your deductible.