In any type of insurance an excess or a deductible is the amount that is paid by the policyholder in case an accident (or damage) occurs to the policyholder. This is also the case with auto insurance where the policyholder has to shell out a certain pre-determined amount before the insurance company forwards any funds.

• A deductible ensures that the insurance company does not have to pay for petty damages or dents as far as auto insurance is concerned. Moreover deductibles can be used as tools to reduce the amount shelled out as premiums. This is because the amount of deductible is inversely proportional to the amount of premiums payable in a policy.
• An important point to note is that you do not have to pay the deductible when purchasing the policy; merely determine it. The deductible is payable only in the case when you meet with an accident and the car suffers extensive damage. If you have a clean record and do not use your vehicle extensively then opting for a higher deductible can prove to be financial prudence.
• Deductibles or excess can be divided into two basic categories: compulsory excess and voluntary excess. Compulsory excess is the minimum payment that is acceptable to your insurance provider. However you can also opt for voluntary excess in case you want to lower the premiums and have enough funds to shell out the amount in case of an accident.
• In some cases the car or the vehicle can be declared as a write off when the cost of the repair is more than the cost of replacement. In such cases the insurance provider will pay the settlement amount after deducting the excess or deductible. If you have a lower deductible then it may come in handy in such cases. However if you have chosen for a high deductible then you may stand to lose in such cases where the vehicle is annihilated.
• Deductibles differ by state, but are usually in amounts of $100, $250, $500 or $1,000. For instance, if you are in a mishap that causes $2,500 worth of damage and your deductible is $500, you are obligated to shell out the $500 and the insurance provider will pay the outstanding $2,000. The type of vehicle, your age, frequency of driving, and the locality you live in are some of the factors that can be taken into consideration when choosing the amount of deductible.

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