For the most part, everybody understands how their deductible works. If you have a claim, the total amount of the loss is first determined. You pay up to the amount of your deductible. Your insurance pays the rest.
By way of example (and let’s focus on car insurance here), let’s say you back into a pole and cause $1,500 worth of damage to your car. If you have a $500 deductible the insurance company will pay $1,000 for your damages – $1,500 damage minus $500 deductible equals $1,000 paid by the insurance company.
You Gotta Believe Me … I Didn’t Do It!
But what happens when somebody else hits you? What if it’s their fault? Do you still have to pay your deductible out-of-pocket? If yes, that doesn’t seem fair. Why should you have to cough up your deductible when the other guy hit you?
Great questions. Let’s get some answers!
When you’re involved in an accident, and it’s the other guy’s fault, you basically have two options for handling your claim. Which way you go depends on what’s more important to you … cash flow or the hassle factor.
Option 1: Work Directly With The Other Guy’s Insurance Company
Cash Flow: Good
If the other driver’s company isn’t disputing the fault of the accident you can work directly with them. In this case, you would not submit a claim on your own policy.
Instead, you would work directly with their claims adjuster to get your car fixed. They would pay all your repair costs, and your deductible doesn’t come into play. You pay nothing out-of-pocket … which is nice. That’s why the Cash Flow is rated Good on this option.
The Hassle Factor is high on this option because you’re at the mercy of a company you’re not insured with. Will they treat you well? Will you have to chase them around?
We, your Protection Coaches can help, for sure. But if we don’t represent that company, we don’t have any influence over them, either.
Option 2: Submit The Claim On Your Policy
Cash Flow: Not As Good
Many times fault is not a cut and dry matter. Often it’s one driver’s word against another’s. Or one company alleges that both drivers had some level of fault.
And even if fault clearly lies with the other driver, their company might give you the runaround.
In these cases, you can submit the claim to your insurance company and let them go to work for you. They’ll pay to fix your car, and then they’ll go after the other driver’s company to get the money back. This“collection process” is called subrogation.
The Hassle Factor is low for this option because your company is working for you – as they should be! But because you’ve submitted a claim on your policy, your deductible will apply. That means you’ll have the cash out-of-pocket for the amount of your deductible.
Good news, though … when your insurance company collects from the other company, you’ll get some, or all, of your deductible back! Either voluntarily or through arbitration, the companies assign a portion of fault to each driver. If the other driver is 100% at fault, you get your entire deductible back. If the other driver is 75% at fault, you get 75% of your deductible back. Etc.