Deductibles & Insurance Payments for Car Accidents

Insurance companies ("insurers") often include provisions in their automobile insurance policies that lower the amount of benefits that will be paid under the policy's no-fault provisions, that is, the provisions that allow for payment of such things as medical expenses and lost wages. Items like medical expenses and lost wages are known as "economic losses," as opposed to non-economic losses, such as payments for pain and suffering.

The reductions in benefits are made in several ways, one of which is through the use of "deductibles." The laws that govern such reductions and deductibles vary from state to state. So, so you need to examine your insurance policy and the laws in your state, or seek the advice of an attorney who is familiar with the insurance law in your state, if an insurer is reducing or trying to reduce your benefits.

Deductibles

In simple terms, a deductible is an amount of money, specifically stated in the insurance policy, that an insurer will not pay if the insured suffers a loss that is covered by the policy.

For example, a policy might state that the insured has $10,000 coverage for medical expenses that arise from a car accident and that the insured has a $1,000 deductible. If, after an accident, the insured has $ 10,000 in medical expenses, the insured is responsible for $1,000, and the insurer will pay the remaining $9,000. If, on other hand, the insured has only $500 in medical expenses, the insurer will pay nothing, because of the deductible.

The insured's primary benefit from accepting a deductible is that it lowers the costs - or premiums - of having the insurance coverage. Essentially, the risk of losses covered by the policy is shouldered by the insured until the deductible has been met. In choosing the amount of your deductible, you'll want to consider how much of an out-of-pocket expense you would be comfortable with.

The particular ways in which insurers can apply deductibles depends on the law of the state, and they can vary quite a bit. For example, in some states, the insurer is allowed to pay 100 percent of the accident victim's economic losses, medical expenses and lost wages, up to the maximum amount allowed by the state's law, without any reduction of benefits by any deductible.

In several states, insurers can either deduct a certain percentage from the insured's claimed medical or disability expenses or offer the deductibles and pay the remainder to the insured. The deductible might be specified in the law, by dollar amount, or the law might allow for a range of amounts, such as from $50 to $2,000.

In some states, the deductibles apply only to the person named in the insurance policy ("named insured") and the insured's relatives who live in the same household. The idea here is to allow a named insured to restrict his or her own recovery without allowing a reduction for relatives, who are not parties to the insurance contract.

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