Understand the difference between premium and deductible in car insurance

Are you researching, or in the process of taking out insurance and don't quite understand the difference between premium and deductible in car insurance? So, follow this article and see more on the subject.

Having car insurance is becoming increasingly important, especially given all the situations we are experiencing. However, hiring this type of service is not always an easy task.

In addition to countless research and quotes, to analyze prices, services and coverage offered, it is important to know the main terms used in the world of car insurance.

This helps a lot to better understand all the conditions imposed when contracting the service, in addition to understanding your rights and the values ​​applied to it.

To help you with this task, we have prepared this article, explaining in more detail the difference between car insurance premium and deductible.

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See the difference between premium and deductible in car insurance

In order for you to definitively understand the difference between premium and deductible in car insurance, it is important to understand what each of these terms means. Therefore, here is a brief explanation of each of the terms mentioned:

Award: the premium is the amount paid for contracting the protection service, that is, it is the price of the car insurance, paid at the time of contracting the car insurance, to guarantee all the benefits and coverage negotiated.

Franchise: the deductible is a mandatory fee that must be paid by the insured person to use certain coverage. It is important to say that not all coverages have a deductible, just as the deductible value is not fixed for all coverages included in the same contract.

Therefore, the difference between premium and deductible in car insurance consists of the fact that the first is the amount charged for hiring the service, and the second is the amount charged for using the coverage.

How is the prize amount calculated?

The premium value is calculated based on information relating to the vehicle such as manufacturing date, mileage, vehicle conservation conditions and installed accessories.

In addition, information relating to the main driver such as age, gender, marital status, vehicle usage habits such as parking on the street or in closed parking lots, frequency of use of the vehicle and places where it travels, among others, also influence the calculation of the prize value.

Premium calculation margins, as well as coverage, additional services and benefits, may vary from one insurer to another, so it is important to do a lot of research before taking out auto insurance.

How does the franchise work?

Just as the calculation of the premium value can vary from one company to another, the value of the deductibles practiced in a policy can also.

Therefore, this is an important issue to consider during your research. Because the definition of the type of deductible influences the final value of the car insurance premium.

Whenever an accident (accident or problem) of partial loss occurs with an insured vehicle, part of the repair cost must be paid by the insurer, and the other part must be paid by the insured.

This part of the insured's responsibility is called deductible and, despite being a mandatory payment, the type of deductible can be chosen by the insured when contracting the service.

In general, three of the four types of existing deductibles are available for the insured to choose from, which are:

1. Normal deductible

The most common in car insurance contracts, it guarantees the payment of a median amount whenever a partial loss incident occurs and the car insurance is activated.

In other words, this type of franchise divides responsibility between the insured and the insurer by 50%. Consequently, leaving the value of the insurance premium more balanced.

2. Increased franchise

The increased deductible, also known as optional deductible, usually has a higher value than the normal deductible. Causing the insured to pay more than the insurer for a repair if the insurance is triggered.

This type of deductible usually leaves the value of the car insurance premium lower, as it guarantees that the insured will be responsible for the majority of the payment for repairs in the event of an accident.

3. Reduced deductible

Reduced deductible can be 25% to 50% discount compared to the normal deductible. In other words, it allows the insured to pay a much lower amount than the insurer if an accident occurs.

However, this type of deductible usually leaves the premium value higher. Therefore, you need to pay attention to this detail when choosing it.

4. Exempt deductible

In addition to these three types of deductibles mentioned, there is also an exempt deductible, which is only valid in some situations and is therefore not available for choice when purchasing car insurance.

In general, the exempt deductible is only valid in cases of total loss, whether due to an accident, covered by the policy, or due to theft, or theft of the vehicle, without it being located within an average period of 30 days.

Now that you know better what the premium is, the deductible and what its types are, it will be much simpler to understand the difference between premium and deductible in car insurance and hire the best service for your needs.