Car insurance deductibles and coverage limits

A deductibles is the amount of money you pay out-of-pocket before your policy coverage kicks in.

Your vehicle is damaged in an accident and it will cost $7,000 to fix it.

• Your vehicle is damaged in an accident and it will cost $7,000 to fix it.
• Your claim is covered by your collision insurance and you have a collision deductible of $1,000.
• You pay your $1,000 deductible and your insurance company pays the remaining $6,000.
• If you have comprehensive and collision coverages on your policy, you'll need to select deductibles for each coverage.

High deductibles on your auto insurance policy will mean you'll pay more out of pocket if your vehicle is damaged or stolen. But high deductibles can also lower your rates on your insurance. Lower deductibles will mean you'll pay less to repair or replace your car, but can increase your premiums.

Consider how much you can comfortably afford to pay out of your own pocket if you need to file a claim. Can you set aside that amount to cover the out-of-pocket expense?

You may be required to pay a deductible each time you file a claim for damage to your vehicle.

So, if your car is damaged by hail in a covered incident, you'll have to pay your comprehensive deductible before your insurance company will step in. Or, if your vehicle is damaged in a covered accident, you'll have to pay your collision deductible.

However, if you're in an accident with another driver that's determined to be his or her fault, you may not have to pay your collision deductible. The at-fault driver would pay for any covered damage to your vehicle or you may pay your deductible upfront and get reimbursed from the at fault party through subrogation.

You might also decide not to file a claim at all if the cost of repairing any damage is less than your deductible amount. Remember that policies are different and insurance varies by state. Read your policy carefully to make sure you understand your coverages and deductibles.

An insurance coverage limit is the largest amount of damages your policy can cover.

Let's say you're at fault in an accident where the other driver involved is injured, and you owe $57,000 for the other driver's medical expenses. Your chosen limit for bodily injury liability coverage is $50,000. This means insurance pays $50,000 and you may be personally responsible for paying the remaining $7,000.

Remember, choosing a higher limit may mean you pay more for insurance now, but it could save you money later if you have an accident.