What Is A Deductible?

A deductible is an amount of money you agree to pay as part of a claim before the insurer is committed to pay the rest of the claim. For example, if you carried collision coverage with a $200 deductible and you had a $500 loss, you would have to pay $200 and the insurance company would have to pay the remaining $300. Basically, deductibles reduce your premiums because you agree to deduct an amount from the claim your insurer otherwise would have to pay. Insurance companies offer deductibles because they reduce the number of small claims which are costly for them to handle. If you purchase a new car with a loan, the financial institution that lent you the money may require you to purchase collision coverage. This is because they see your car as collateral for the loan, and they want to make certain it is worth something if they need to repossess the vehicle.

The information on this page is meant to provide a general overview of the law. The laws in your state and/or city may deviate significantly from those described here. If you have specific questions related to your situation you should speak with a local attorney.

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