One of the most frequently asked questions when it comes to auto insurance is about excess or deductibles. The automobile excess is simply an amount in any automobile insurance claim that the insured must assume; the insurer pays the rest.
For example, if the total claim is $ 2,000 and you opted for an amount in excess of $ 600, you will have to pay the $ 600 while your insurer covers the remaining $ 1,400.
What this means is that if the total amount of the claim is less than the excess, you will not get anything from the insurer. In the example above, if your total claim is only $ 500, you will have to pay it all. You may think this setup is unfair, but there are a few reasons why insurers impose a franchise clause on your auto insurance policy:
- Mitigate risks. The greater the risk you have, the greater the stipulated excess.
- To protect yourself from the insured’s small claims. This benefits the insurer for two reasons.
- Minimize the fixed administrative costs of the company associated with each claim. These administrative overheads are fixed, whether the claim amount is $ 1 or $ 10,000, so it would not be economical for the business to process every small claim.
- The number of claims to be processed would be significantly reduced, giving the insurer more time to focus on substantial claims.
- By holding the insured responsible for a part of the damage or loss, they would be more careful and responsible when driving their cars.
- Minimize or reduce the liability of the insurer.
- Allowing an insurer to cover drivers with bad records or driving violations.
You can also use the excess to your benefits. Opting for a higher car franchise is a sure way to lower your premiums because it lowers your car insurance [http://www.carinsurancesingapore.com/articles//tag/online-car-insurance-quotes/] costs. However, keep in mind that the excess amount may be applied differently by various insurers under different conditions, so ask your insurer about the best way to lower your premiums by opting for a higher deductible.
