How Premiums And Deductibles Work With Auto Insurance

Insurance Blog

If you are new to the world of auto insurance, you might not understand how insurance works. You might also have questions about insurance terms, coverage types, and options. As you begin preparing to buy auto insurance, you should understand what premiums and deductibles are and how they work. Here is information to help you know how these two parts of auto insurance.

Premiums with Auto Insurance

Every insurance policy you purchase has a premium, and this word describes the costs of the policy. Most auto insurance agents calculate the premiums in terms of six months of coverage. If you plan on getting several quotes, you should make sure each one covers six months of protection. You do not have to pay the full amount up front if you cannot afford it. Most agencies let you pay monthly, as this is a more affordable way to pay for insurance expenses.

Deductibles with Auto Insurance

A deductible on an insurance policy is not the amount you pay for the coverage. Instead, it is the amount you pay if you file a claim and receive compensation from your insurance company. For example, if you file a claim for an auto accident and have $5,000 in damages, you will pay part of it, and your insurance company will pay the other part. The part you pay is the deductible. If the deductible is $1,0000, you must pay this amount. The insurance company then pays the remaining $4,000.

The Correlation Between Premiums and Deductibles

The other thing to know is the correlation between your premium and deductible. An insurance policy costs more for a lower deductible than a higher one. As you increase your deductible amount, your premium amount decreases. As you reduce your deductible, your premium increases.

If you are wondering about the cost differences with different deductibles, ask an agent. People who want to pay the least for insurance expenses typically choose higher deductibles, but you should ask to learn more about the differences before making your decision.

You should also consider your budget for this decision. If you encounter an accident and have to pay the deductible, how much could you afford to pay?  

Now that you understand the meanings of these terms, you might be ready to call an agent to get the auto coverage you need. If so, call an auto insurance agent, like Germain Insurance Agency, today to request a free quote.


28 May 2020

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