Most people are familiar with deductibles, however, many do not realize what sections of their auto insurance policy may have them.

What is a deductible?

A deductible is the portion of an insurance claim you agree to pay. Your insurance company covers the remaining cost.

Your chosen deductibles play a part in how your auto insurance rates are calculated. Depending on how much financial responsibility you take on in the event of a claim, your rates will reflect your commitment. Take on more responsibility (i.e. increase your deductibles) and your rates will lower, take on less responsibility (i.e. decrease your deductibles) and your rates will increase.

Because deductibles affect your rates, it's wise to review them. There are money-saving opportunities if you are willing to take on more out-of-pocket responsibility in the event of a claim. However, no matter what deductible is chosen, it's prudent that you choose one that is affordable because this is how much you will have to pay if you should ever need to make a claim.

Optional auto insurance coverages that may have a deductible

Specified Perils: Provides coverage for repairs or losses that are a result of specific perils. The specific hazards that are covered will be detailed in your policy but typically include fire, theft, attempted theft, hail, lightning, windstorm, earthquake and the like.

Comprehensive: Provides coverage for all losses covered under Specified Perils but also falling or flying objects, missiles and vandalism.

Collision: Provides coverage for repairs or losses caused by a collision with another vehicle, as well as accidents that involve only yourself (e.g. you lose control of your car and it rolls over).

All Perils: Provides coverage for all losses covered under Collision and Comprehensive as well as theft of your vehicle by someone who lives in your home or is employed by you to drive, use, service or repair your vehicle.

Liability for Damage to Non-Owned Vehicles: Provides coverage (third-party liability and accident benefits) for cars you drive that you do not own, like those you borrow or rent.

Non-optional auto insurance coverages that may have a deductible

Third-Party Liability: Third-party liability offers coverage to policyholders who are sued and held legally liable for injuring or killing someone or damaging his or her property. Depending on the province you live in you may have a deductible.

Direct Compensation - Property Damage: Provides coverage for repairs or a loss of a vehicle or its contents to the extent that the other driver was at fault for the accident. Although not available in all provinces, this coverage may have a deductible.

Deduce what's right for you

Depending on where you live, you may have other coverages available to you that have deductibles. The above are the most common. Review your policy and familiarize yourself with those parts of it that have deductibles and then see if it makes sense to raise them. Remember, the higher the deductible you choose, the lower your insurance rate. How much lower? Well that depends on what coverages you have and which deductibles you choose to increase, but it can be anywhere from five to 10 per cent.

Looking for more information about deductibles and your auto insurance?

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