16 September 2015

Car insurance: Why is there no $0 deductible option?

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What exactly is an insurance deductible?

A deductible is the amount you have to pay if you need to make a claim. The cost of your insurance may be influenced by the deductible you choose. Essentially, the higher your deductible, the lower your insurance premiums. However, your cost will be higher when you make a claim, so you need to assess your financial ability to pay a higher deductible if an accident occurs.

Every insurance policy has a deductible. It can range from $0 to $5,000 or more. In some cases, you may be exempted from paying a deductible. That’s right! For example, if you are in an accident in Quebec involving another identified vehicle and you are not at fault. You may also be exempted if your vehicle is damaged by fire or lightning.

Who do I pay the deductible to?

When making an insurance claim, the deductible is taken off the settlement agreed upon with your insurer. If a mechanic repairs your vehicle for $3,000 and your deductible is $500, you must pay your mechanic the $500 when picking up your vehicle. If your vehicle is a total loss and your insurer reimburses you directly, the deductible will be taken off the amount.

Total loss: 15 000 $ -

Deductible:      500 $

Compensation:    14 500 $

You insurer will pay out e 14 500 $.

Now you know—if there were no deductible, your insurance premiums would be higher.