Are you new to getting auto insurance and don't know a lot about it? One confusing aspect that you may have questions about is the deductible. Here is what you need to know about this part of your auto insurance policy.

What Is An Insurance Deductible?

The deductible is the amount that you pay out of your own pocket before your insurance provider provides you with coverage. Since a deductible is your responsibility, a higher deductible can result in a lower premium for the policy. Meanwhile, a low deductible can cause your premium to be much higher because the insurance provider is taking on more of the financial responsibility.

How Does A Deductible Work?

If you are involved in an accident and need to make a repair, your auto insurance provider will pay for the damages up to your insurance policy limit. However, you must pay a portion of the repair bill in the form of a deductible.

For example, a repair to your vehicle may cost $3,000. If your auto insurance deductible is $500, then you must pay that before the insurance provider will pick up the rest. You'll end up paying $500 out of your own pocket, and the insurance provider will pay for the remaining $2,500.

Are There Different Types Of Deductibles?

Auto insurance providers use flat deductibles, which are when you pay a set amount of money when you use your insurance policy. In the example previously mentioned with a $500 deducible, you would always pay $500 each time you use the policy to make a claim. This is a bit different than a health insurance deductible where you pay the deductible over several services throughout the year

Can You Change Your Deductible?

Know that you are not stuck with your deductible for the entire length of the auto insurance policy. You can make changes at any time to increase or decrease your insurance premiums. You'll be given a prorated rate for the amount of coverage that you had, and given a refund for the rest of the policy that you've already paid for. You'll then pay the new insurance premium moving forward at the higher or lower rate.

However, keep in mind that your deductible applies to damage that is being repaired at the time the damage occurred. If you were to change your deductible after an accident, but before you made a claim, you'd still pay your old deductible from before you changed the policy.

Contact a local auto insurance company to learn more, like LH Griffith and Company.