A deductible is the amount of money you must pay out of your own pocket before your car insurance kicks in. Deductibles only apply to certain coverages, such as comprehensive and collision, and typically range from $100 to $1,000.
A policy limit (or “limit of liability”) is the maximum amount your insurance company will pay for any claim covered under your policy. Policy limits are often comprised of two dollar amounts — for example, $100,000/$300,000. The first amount ($100,000) would be the per person policy limit, while the second amount ($300,000) is the total limit in case of a covered accident.
What does the state require for auto insurance?
- CA – 15/30/5
- UT – 25/65/15
- NV – 25/50/20
- MT – 25/50/20
- WY – 25/50/25
- AZ – 15/30/10
Here’s one example of how deductibles and policy limits work. Let’s say your car is damaged in an accident you caused, you havewith a $1,000 deductible. If the cost to repair your car is $500, you will pay the entire $500 since it is less than your deductible.
To keep monthly premiums low, drivers often opt for higher deductibles and lower policy limits. But if you can’t pay your deductible or accident-related expenses above and beyond your policy limits, you may find yourself in a financial crisis. Choose wisely. Consider your risk tolerance and financial circ*mstances when deciding the level of protection that’s right for you and your family – then work withyour insurance representative to create a policy that balances your individual needs with a premium, deductible, and policy limit you can afford.
