Car Insurance Deductible: Everything You Need to Know






Understanding the details of a car insurance policy and especially the deductible can seem a little complicated.

However, this is fundamental knowledge for you if you want to protect your vehicle and, at the same time, obtain the best cost-benefit ratio when taking out car insurance.

What is a Car Insurance Deductible?

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The deductible is a fee that the insured undertakes to pay if it is necessary to activate the insurance to repair partial damage to the vehicle.

In other words, it is the part of the loss that the insured decides to assume in the event of an accident.

This value is defined when taking out the insurance policy and is clearly detailed in the general conditions of each contract.

Types of deductibles in car insurance

There are four basic types of deductibles in car insurance: Normal, Extended, Reduced and Exempt.

1. Normal Franchise:

It is the standard deductible, stipulated by the insurer based on the value of the insured vehicle.

The standard deductible in car insurance is a common form of coverage that requires a certain fixed amount to be paid by the insured in the event of a covered loss.

This amount must be paid before the insurer begins paying the remaining costs.

For example, if you have a deductible of R$1,000 on your car insurance and you suffer an accident that results in a total loss of R$4,000, you will be obliged to pay the first R$1,000 and the insurance company will cover the R$3,000 remaining.

The value of the normal deductible varies depending on the insurance policy and plan agreed between the insured and the insurer.

However, generally the higher the deductible, the lower the insurance premium will be, since the insured assumes more financial responsibility in the event of an accident.

It is important to remember that the deductible only applies to damage to the vehicle itself, and not to damage caused to other vehicles or property, or to bodily injuries, which are normally covered separately by insurance.

2. Expanded Franchise:

In this option, the deductible value is higher, which implies a lower insurance cost. It is advantageous in situations where the estimated risk of an accident occurring is low.

The increased deductible on car insurance is an option that allows the insured to reduce the insurance premium, the amount paid for the policy, in exchange for assuming a greater portion of the cost in the event of an accident.

By opting for an increased deductible, the insured is essentially “gambling” that he won’t get into an accident. If he’s correct, he’ll save you money on your insurance premiums.

However, if he is wrong and is involved in an accident, he will have to pay more out of pocket to cover the costs before the insurance company steps in and covers the rest.

This may be a sensible choice for drivers with a good driving record who feel they have little risk of being involved in an accident.

However, it is important to remember that accidents can happen at any time and to anyone, and the cost of vehicle repairs can be substantially high.

In short, the increased deductible allows the policyholder to reduce the cost of insurance, but also increases the amount they will have to pay out of pocket if there is a claim.

This requires careful consideration of the risks and benefits before deciding whether this is the right option for the individual.

3. Reduced Deductible

Here, the deductible value is lower, implying a higher insurance cost. It may be advantageous if the estimated risk of an accident occurring is high.

Reduced deductible in car insurance is an option in which the insured pays a higher monthly insurance premium in exchange for a reduction in the deductible value.

This means that, in the event of an accident, the vehicle owner needs to pay less out of their own pocket to cover the costs of repairs.

For example, if the normal deductible for car insurance is R$2,000, but the owner opts for a reduced deductible, this amount could drop to, say, R$1,000.

However, this option will result in a higher insurance premium.

A reduced deductible can be a good option for people who are not comfortable with potentially having to pay a large amount all at once in the event of an accident.

Instead, they may pay a little extra each month to lessen this financial risk.

However, it’s important to remember that if you never need to make a claim, you won’t get back the extra money you paid for your insurance premium.

4. Exempt Deductible (or Zero Deductible):

In this case, the insured would not need to pay anything in the event of an accident. Obviously, this option results in the most expensive insurance premium.

The exempt deductible or zero rate is an option offered by some insurance companies in which the insured does not need to pay anything in the event of a claim.

This means that, if the car suffers any breakdown or damage covered by the policy, the insurance company covers 100% of the cost of repairs, without requiring a financial contribution from the insured.

This type of franchise can be especially attractive for people who do not want, or are unable, to pay extra if something happens to the car.

However, it is important to always read the insurance conditions carefully, as the exempt deductible or zero rate often results in a higher premium (insurance value).

In addition, not all events can be covered by the exempt deductible. For example, some insurance policies may require you to pay your deductible the first time you make a claim.

Or in the event of traffic accidents. Therefore, it is essential to read the details of the insurance contract and clarify any doubts with your broker or insurer before making a decision.

How to choose the best deductible for your insurance?

This choice depends on the profile and individual needs of each insured person. Before making a decision, consider factors such as the value of your vehicle.

The possibilities of an accident and how much you are willing to pay in case of partial damage to the vehicle.

When taking out a higher deductible (Extended), the value of the insurance policy will be cheaper, but remember that in the event of an accident you will pay more.

So, if you have a low-risk profile (you don’t get into accidents often, have safe parking, etc.), this could be an interesting option.

The reduced deductible means paying a little more for insurance, but in return, if an accident occurs, the costs will be lower for you.

Therefore, if you consider yourself to be at greater risk, this option may be worth considering.

The final decision must be made based on an analysis of your profile, behavior and financial situation.

One thing is certain: it is necessary to understand the deductible system well before signing the insurance contract.

Read also: Car Insurance Which is the Best – Practical Tips for Choosing

How to make good Policies?

To carry out good policies, it is essential to understand your needs and make a careful analysis of the insurers’ proposals. Here are some tips:

1. Compare several proposals: Nowadays, many insurance companies allow you to make quotes online. Take advantage of this facility and compare several proposals before making a decision.

2. Consider the strength and reputation of the insurance company: Before making a decision, research the insurance company. Is it solid? Does it have a good reputation in the market? What about customer service?

3. Analyze the Cost x Benefit: Don’t limit yourself to just looking at the value of the insurance premium. Also evaluate the cost-benefit ratio of the insurance as a whole, including the deductible value and additional coverage included.

4. Consult an insurance broker: A trusted insurance broker can help you choose the best policy for your needs. He can give important tips and help you understand all the details of the proposal.

Remember that the final decision is yours, so be aware of all the information before opting for vehicle insurance with the deductible that best suits your profile and needs.

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