Smart Insurance Tips | Is a lower pre-insurance premium always better?
Does a low car insurance premium mean a good deal? Besides looking at the coverage, it's even more important to look at the "minimum deposit" (MDF). Different car insurance companies have different MDF rates depending on the situation, and the difference can be significant. Therefore, when comparing policies from different insurance companies, in addition to comparing premiums, remember to carefully read the details of the MDF and other terms and conditions. This article summarizes frequently asked questions about "MDF" and answers them clearly for you
What is a car insurance prepayment/prepayment fee?
The deductible, commonly known as the prepayment or excess, refers to the portion of the cost of a claim that the policyholder must pay upfront. The remaining amount is then covered by the insurance company. For example, if a policyholder claims $15,000 in damages due to a traffic accident, and the policy includes a $5,000 deductible, the policyholder must pay the $5,000 deductible upfront, and the remaining $10,000 will be covered by the insurance company. In auto insurance, the deductible generally only applies to claims for vehicle damage and not to personal injury or property damage to third parties.Generally speaking, the higher the base premium for car insurance, the lower the premium will be.
How is the car insurance premium calculated?
There are two ways to calculate the car insurance premium: one is a specific amount, and the other is a percentage of the compensation amount
For example, in the same accident, assuming the claim amount is 100,000 yuan: if the deductible is a fixed amount, set at 5,000 yuan, the car owner must pay the first 5,000 yuan regardless of the actual compensation amount, and the insurance company will then pay the remainder; if the deductible is calculated as a percentage of the compensation amount, such as 1% of the total compensation, the car owner must first pay 100 yuan (1% of 100,000 yuan), and the insurance company will pay the remainder. Sometimes some policies specify that the deductible is 1% of the compensation amount or 5,000 yuan, whichever is higher
Different situations require different deposit fees?
The prepayment fee for the same item may vary depending on the insurance company. All types of car insurance policies will clearly list the items and calculation methods of the prepayment fee. The types are roughly as follows:
Basic down payment
Young drivers/under 25 years old will receive a base fee
Drivers with less than 2 years of experience will have to pay a deposit
Anonymous driver prepayment fee
Theft prepayment
Third-party property loss deposit
Parking under-parking fee
Please note that car insurance deductibles are calculated cumulatively.For example, suppose a car insurance policy has the following deductible:
Basic deposit: $1,000
Young driver: $1,000
Inexperienced driver: $1,000
Unregistered drivers: $1,000
The car owner (policyholder)'s 20-year-old son had just obtained his driver's license and was involved in a traffic accident while driving the insured vehicle. The son was not the registered driver on the policy. If the car owner wants to file a claim for this accident, he must first pay the aforementioned four deductibles, totaling $4,000. This $4,000 includes the basic auto insurance deductible plus the fact that the son was a "young driver," "inexperienced," and "not registered driver on the policy" at the time of the accident. Therefore, all four deductibles will be added to this claim before the insurance company will pay the remaining amount
When is a deposit fee required?
Regardless of the type of car insurance, a deductible is usually required before any claim is made, and the remaining amount will be reimbursed by the insurance company. If you are unfortunately involved in a traffic accident, stay calm and call the police and notify your insurance company or agent
If you have comprehensive insurance, the process is simpler. After the car owner gets a quote from a repair shop, the insurance company will send an insurer to follow up on the costs, calculate the vehicle repair fees, the owner's prepayment, and the vehicle's depreciation rate, thus completing your basic vehicle compensation. If the court rules that the traffic accident was caused by the other party's fault, because your insurance company has already completed your vehicle compensation, when the insurance company seeks compensation from the other party, it can also help you recover the prepayment. However, whether or not compensation is paid, or whether the other party accepts it, is decided by the other party's insurance company or car owner
If you only purchase third-party liability insurance for your vehicle, there is no compensation for damage to your own vehicle. You can only determine liability and compensation through settlement or court judgment
Car insurance at a "seafood price"? Beware of hidden fees!
When choosing car insurance, in addition to comparing premiums and coverage, remember to pay attention to the deductible.A previous survey by the Consumer Councilshowed that even with similar car owner and driver conditions, the deductible amount for different policies can vary by as much as 33 times. Too busy to research the various deductible options? AWM has car insurance professionals who can analyze the most realistic car insurance quotes for you. They will patiently find suitable coverage based on your needs and strive to obtain more discounts. Feel free to use AWM's free online quote anytime!