What are deductibles in the context of personal auto insurance?

In personal auto insurance, deductibles refer to the amount the insured is responsible for paying out-of-pocket before the insurance company covers the remaining costs of a claim. When a policyholder files a claim, they must first pay the deductible amount, and then the insurer takes over and pays for the rest of the covered expenses up to the policy limits. This mechanism is a key aspect of insurance policies as it helps reduce the number of small claims that an insurer must handle, ultimately keeping premiums lower for all policyholders.

For instance, if a driver has a $500 deductible and gets into an accident resulting in $3,000 worth of damages, they would pay the first $500, and the insurance would cover the remaining $2,500. This feature not only emphasizes the shared risk between the insurer and the insured but also encourages policyholders to be more mindful and responsible when driving, knowing they have a financial stake in the outcome of claims.