The requirements for coverage vary by state so you need to examine your policies and laws to determine if there are minimum or maximum payments you can pay before the policy starts paying for damages.
DeductiblesYou may hear the word deductible used when deciding how much coverage you want to pay before the insurance company starts covering your claim. While you may pay less for a higher deductible, it also means that you'll have to put in more toward the cost of repairing damages to your vehicle.
For example, your policy might state that you have $10,000 coverage for medical expenses and there is $1,000 deductible. If, after an accident, you have $10,000 in medical expenses, you're responsible for $1,000 before the benefit of the policy starts paying the remaining $9,000. However, if you have only $500 in medical expenses, the insurer will pay nothing, because it'is less than the deductible. You may still put in a claim, but the policy won't cover it.
This also applies to damage to your vehicle.
You'll need to determine if you want to pay higher premiums for a lower deductible, or less money for higher deductibles. It depends on many factors, including your net worth, how much your vehicles are worth, how much cash you have available, and more.
Reductuion of BenefitsEach state has its own method about how insurers can apply deductibles.
For example, in some states, the insurer is allowed to pay 100 percent of the accident victim's economic losses, medical expenses and lost wages, up to the maximum amount allowed by the state's law, without any reduction of benefits by any deductible.
In several states, insurers can either deduct a certain percentage from the insured's medical or disability expenses or offer the deductibles and then pay the remainder to the insured. The deductible might be specified in the law, by a particular dollar amount, or the law may allow for a range of amounts, such as from $50 to $2,000.
In some states, deductibles may be applied only to the named insured on the policy and to the insured's relatives, who live in the same household. The idea here is to allow the insured to restrict his or her own recovery, but not to allow a reduction of benefits against the relatives, who are not parties to the insurance contract.
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