What does it mean to have a $0 deductible

With a no-deductible car insurance policy, you do not pay out of pocket if you have a claim. When you have a deductible, you must pay that amount, often $500 or $1000, before your insurance company pays the rest of your costs.

Deductibles usually apply to comprehensive policies, which pay for non-collision loss or damage to your vehicle, and collision coverage, which pays for damage to your vehicle after an accident. While zero deductible car insurance policies are rare in the United States, 4AutoInsuranceQuote.com reports that many European drivers have this type of auto coverage.

How Do Auto Insurance Deductibles Work?

When you file a claim with your auto insurer after an accident, the policy will cover eligible expenses up to your chosen limits. Before you receive compensation for property damage and personal injury, however, you must pay the deductible amount you selected when you bought your policy. Insurify notes that unlike deductibles for your health insurance policy, which are cumulative, you must pay a deductible every time you have an auto insurance claim.

For example, say you have an accident resulting in $5000 in vehicle damage. You have a collision policy with a $1000 deductible. The insurance company sends you a check for $4000 to fix the vehicle, and you must pay the remainder.

You can decide to have different deductible amounts for different auto insurance policies. For example, you could choose $500 for collision and $1000 for comprehensive. Windshield replacement is a common no-deductible option from many car insurance providers.

Liability policies are always no-deductible car insurance. This type of coverage pays for bodily injury and property damage suffered by others if you cause an auto accident.

How Does Zero-Deductible Car Insurance Work?

Your car insurance company pays for the full cost of your medical bills and auto repairs if you have a zero-deductible plan. While you will pay a high premium for this type of coverage, you avoid the possibility of an unexpected cost if you do have an accident. Insurers take on all the risk with zero-deductible auto insurance, which is why drivers pay more for these policies.

CarInsuranceComparison.com notes that the availability of no-deductible car insurance varies by state. For example, some states waive the deductible for glass coverage if you can repair rather than replace a damaged windshield. An auto insurance agent in your area will have more information about the laws and the availability of no-deductible policies in your state.

As mentioned, few auto insurers offer these policies because of their inherent risk. Those that do offer a zero-deductible option typically only have it available for excellent drivers with no history of claims. An excellent credit score is also an asset for those seeking this type of insurance.

If you can't find a no-deductible insurer, consider opting for a low deductible such as $250. Some companies offer a disappearing deductible option, in which they lower your deductible without raising your premium for each year you go without a claim. If you maintain a good driving history, you could eventually reach a zero deductible with this type of arrangement.

How Do Deductibles Affect Insurance Cost?

Deductibles help insurers divide the risk of providing auto insurance with their customers, according to The Zebra. As a result, your car insurance premiums go down if you opt for a higher deductible. A no-deductible policy will lead to the highest premium cost based on this factor.

Some drivers choose a high-deductible policy so they have the lowest possible premiums. With this strategy, however, you could end up with an out-of-pocket cost you can't afford in the event of an accident. You should have a deductible no higher than the amount of money you have saved for an emergency to avoid unwanted debt.

WalletHub did the math to find out how much the average driver saves by switching from a $1000 deductible to a $2000 deductible. You'll save about $5 a month on your policy with this change, a decrease of just 6 percent. If you have an accident, you'll double your out-of-pocket costs.

However, if you have a $500 deductible and change to a $1000 deductible, you will save an average of $40 a month or $240 on a six-month policy. You would save the increased deductible cost within a year if you have no accidents or claims, so this option makes sense if you tend to be a safe driver.

When Do You Have to Pay Your Deductible?

Your deductible applies to your own claims for car repairs and medical expenses after an accident. You have to pay your deductible to receive:

• Personal injury protection
• Collision coverage
• Comprehensive coverage

The exception to this rule is if the accident was caused by another driver, in which case that person's liability insurance will pay your costs.

You always have to pay your deductible after an accident unless you plan to pay out of pocket for your auto repairs and medical bills. If you do not have the cash, you can request a payment plan from your mechanic for the amount of the balance. However, the repair company can also keep your car until you pay the outstanding bill. The mechanic cannot overcharge the insurance company and reduce your bill, as this constitutes insurance fraud.

When shopping around for auto insurance, compare rates with different deductibles to see how changing this factor affects your premium quotes.

Sources:

https://insurify.com/blog/car-insurance/car-insurance-no-deductible/

https://www.thezebra.com/auto-insurance/coverage/car-insurance-deductibles/

https://wallethub.com/edu/ci/car-insurance-deductible/69574

https://www.carinsurancecomparison.com/what-is-zero-deductible-auto-insurance/

https://www.4autoinsurancequote.com/zero-deductible-auto-insurance/

https://www.caranddriver.com/news/a24233073/active-safety-repair-costs/

https://www.caranddriver.com/insurance/

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