What is the part of the insurance policy that tells how much the owner must pay before the insurance company will pay for repairs or replacement of a vehicle?
The insurance policy is the contract that states how much the insured person will pay for potential losses. The amount of money the insured person is responsible for paying is known as the deductible and/or co-insurance. The policy will state if the insured person has to pay a deductible, or co-insurance, or a deductible and co-insurance. A deductible is the dollar amount that is paid by the insured person before any of the loss is covered by the insurance company. For example, an auto insurance policy might have a $200 deductible, meaning that the insured pays the first $200 of a covered loss. Co-insurance requires the insured to pay a fixed percentage of the loss after the deductible has been paid. For example, the insured may have to pay an additional 20% of the loss after the deductible is paid. Automobile insurance policies more commonly have only deductibles. Therefore, if your policy states that you have a $500 deductible and you have $3000 worth of damages to your car, you would pay $500 and the insurance company would pay $2500.