Businesses buy commercial auto insurance for vehicles they own, or to cover employee drivers in situations where they drive their own cars for business purposes. This coverage will prove essential in helping your business pay for the costs arising from wrecks and other vehicle damage, as well as accident lawsuits.
However, commercial auto coverage is not a promise that you will have unlimited financial assistance from your plan. In fact, your policy itself will outline exactly what costs will be borne by your insurer, and which ones you must pay yourself. One cost that will be your responsibility is your deductible, and this is a cost that you can influence yourself and customize to your advantage. Let’s take a closer look at how these benefits work, and how they can affect your insurance premiums.
What’s a Car Insurance Deductible?
When insuring your company-owned vehicles, you will likely buy physical damage protection. It will include both collision coverage to pay for damage from wrecks, and comprehensive insurance that will pay for damage from anything other than a collision (fires, severe weather, etc.).
These benefits will include deductibles, which will influence how much assistance your policy will provide you following a claim. When you file a claim on your policy, your insurer will subtract the cost of your deductible from the total cost of your repairs. Therefore, the deductible will be a cost you have to pay yourself, rather than letting your insurance pay.
How do Deductibles Work?
Suppose that you wreck one of your company cars, and your insurer determines that it has 5,000 worth of damage. If they look at your commercial auto policy and see that you have a $1,000 collision deductible, then they will only pay you $4,000 in settlement costs. The presence of the $1,000 deductible means that you must pay that amount to equal the total damage cost of $5,000. Thus, you can think of it as your personal responsibility for a claim.
Can Deductibles Help Me?
You must choose your commercial auto insurance deductible carefully. After all, you want to be able to pay a cost that is affordable following a claim on your policy. This is only compounded by the fact that if your vehicle sustains damage that is less than your deductible value, then your plan will pay nothing towards your damage costs. Therefore, you cannot choose the highest deductible available on your plan and it expect it to be to your benefit.
However, choosing the lowest possible deductible is not always the best decision. The lower your deductible, the more of a cost your insurer will have to pay for a damage claim. Therefore, they might charge you more in premium costs to cover the risk. Therefore, it’s better to choose a deductible that is as high as you can afford, which will often lead to a lower premium.
To balance your deductible, work with your commercial auto insurance agent. They will be able to advise you on the appropriate ways to both save money on your premium without overshooting the mark on your out-of-pocket obligations.
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