Defining the deductible

What comes to mind when you hear the word “deductible?”

Insurance, probably. Maybe you assume it has to do with money (again, because it’s insurance).

I can tell you my theory—I thought it was just one of those big, complicated words lawyers and insurance companies liked to throw around to make my life complicated. But … then I started a new job. A new job at an insurance company. And with my new job came a new commute. And guess what? There are a lot of accidents on my new route. Between my new job and new route, it didn’t take long for me to start paying attention to my own car insurance coverage needs.

So what’s a deductible anyway?

Turns out it’s not that complicated. It’s really just a question: If you get in an accident, how much can you afford to pay out of pocket? (Hint: $0 isn’t an option.)

With car insurance, you’ll be protected to a certain extent for any covered accidents you’re involved in. The “deductible” is how much you’re required to pay before your insurance kicks in. Thankfully, because people have different budgets, you have options when it comes to the amount of your deductible.

So, it does have to do with money.

If you don’t think you’ll get into an accident, and you’d prefer a lower monthly payment, then you may want a higher deductible. You pay less each month, but in the case of an accident, you’ll have to pay more up front before your coverage takes over. Alternatively, if you aren’t sure about your risk (and you don’t have a lot of cash available at a moment’s notice), then maybe a lower deductible is the way to go.

Wait, maybe my deductible can be $0?

I know. I said a $0 deductible isn’t an option. But, at Progressive, we offer a “Deductible Savings Bank” that could help you lower what you may need to pay out of pocket.* Here’s how it works: After you purchase this feature, we’ll credit $50 to your Deductible Savings Bank for every claim-free policy period you experience. Then, if you ever have a claim, you can use those credits against your deductible.

For example, if you have a $500 deductible and $100 in your Deductible Savings Bank, then you’d only be responsible for $400. Make sense? If you’re a really safe driver, over time you could earn enough credits to cover your entire deductible amount, turning that $0 deductible myth into reality.

In the end, “deductible” is a big word, but, to me, it’s really just a way to get you to think about your budget and preferences.

*Deductible Savings Bank not available in all states or situations.