Tow truck insurance comes with many insurance-related terms that you need to know. Liability. Exclusions. Claim. Premium. One of those words is deductible. Now, your deductible is an important part of your tow truck insurance. We’ll give you the definition of deductible and explain how it affects your tow truck insurance – it might seem like just a random number, but it’s much more than that.
What is a deductible?
A deductible is the amount of money a policyholder will pay towards a claim. To put it simply, your deductible is the money you agree to pay towards a loss before the insurance company will step in to cover the rest of the cost. Basically, if you have a claim you’re responsible for paying the agreed-upon amount. There’s no getting around it.
How does my deductible affect my tow truck insurance rates?
Now that’s a good question. Your deductible does indeed have an effect on how much tow truck insurance costs. You set it based on how much your business can comfortably afford to pay in the event of a claim, but the catch is that the higher you set your deductible, the lower your premiums could be. That’s because you’re accepting more risk. Anyways, it’s a bit of a balancing act because while you probably want the lower premium, you probably don’t want to be stuck with a huge deductible if you have a claim. You don’t want to choose an amount that’s unrealistic or that would be financially burdensome or ruinous if you had a claim.
How does my deductible affect when I should file a tow truck insurance claim?
It can be tricky to decide whether to file a claim or pay out of pocket for a loss that’s relatively minor. We mentioned that having a higher deductible can help you get lower tow truck insurance premiums. It’s because you’re accepting more risk and because you’re less likely to file a claim – you have to pay your deductible anyway, so it might not be worthwhile.
Presto – we’ve just created a tow truck company with a $1,000 deductible for their physical damage coverage. Boom – now we just made a tree limb fall on one of their wreckers. This company has rotten luck. Anyways, the damage to the tow truck comes out to be $1,350. So, the business would have to pay $1,350 before the insurance company paid $350.
Now, the business could file that claim, and so long as their policy covers rogue trees that fall out of nowhere they’d be covered and they could get their $350. But the business owner realizes that filing a claim could make their tow truck insurance premium go up, so ultimately they decide to pay the whole $1350 because they don’t want the claim to count against their insurance rates. They’re already out $1,000. May as well make it $1,350 and avoid the potential rise in tow truck insurance rates, right?
See? A higher deductible means you’re less likely to file a claim. It can greatly influence your thought process when you consider filing a claim.
At any rate, it’s important to choose your deductible wisely. Yes, setting a higher one can help you save money on your tow truck insurance rates, but you don’t want to set it too high. Like we said, you have to find the balance by considering how much your wrecker or towing business can comfortably afford if you have a claim or loss. So, give your deductible a little more thought than just picking a number out of a hat. You have to choose the amount that’s right for your tow truck business.
If you’re looking to save some money on your tow truck insurance rates, we can help you with that. We can shop for your wrecker insurance so that you know that you’re getting the best possible price. All you have to do to get tow truck insurance quotes is fill out our quote form online or give us a call today.
Photo credit for image of red wrecker:
Director of Business Solutions
Miller Industries, Chattanooga, TN