Getting car insurance can be daunting for first-timers as they’re bombarded with a lot of new information. One of them is deductible.
Many new car owners don’t understand how it works and face issues when submitting a claim. So, here’s a quick guide to help you understand the basics of the car insurance deductible.
What is deductible in car insurance?
A deductible in car insurance is the amount you must pay on your own for repairs after an accident. It’s a predetermined amount that you agree to pay before your insurance company starts providing compensation for losses.
Let’s say you have a car insurance policy with an RM500 deductible, and you get into an accident that causes RM3,000 worth of damage to your car. In this case, you are responsible for paying the first RM500; your insurance company will cover the remaining RM2,500.
How does it work?
Clients can usually select the deductible amount when they purchase auto insurance. Depending on the policy and insurance provider, the amount can be higher or lower.
Normally, higher deductibles mean clients will pay lower insurance premiums because they take in more risk. But, you should always consider your financial situation before deciding on how much deductible to go for.
When do you pay the deductible?
Unlike medical insurance, you don’t have to pay an annual deductible amount for car insurance. You are only responsible for the amount stated in your policy each time you file a claim. After you pay the specified amount, your car insurance company will cover the remaining cost of repair or replacement.
When your claim is approved, your deductible will usually be applied once the insurance company issues the payment. The insurer will deduct the amount from the approved claim amount. Let’s say the approved claim amount is RM5,000, and your car insurance deductible rate is RM500, so your insurer will issue you a payment for only RM4,500.
What if my deductible is more than the cost of repair?
If your car insurance deductible is higher than the cost of damage, then you will pay the entire cost of repair using your own money. This is because insurance companies only cover damages that exceed your deductible amount.
For example, your repair cost is RM700, and your deductible is RM1000. In this case, you will pay the entire repair cost on your own because the cost of repair is less than your deductible. So you don’t need to file an insurance claim.
Car insurance deductible
Understanding how deductible works is important if you’re a car owner, so you can pick the right insurance plan and know when to file a claim. Overlooking important elements like this can save time because the claims process can be tedious.
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