What Is a Deductible?

You manage to scrounge up the $28/month for your car insurance, thinking that you're all set if anything ever happens.

And then…something happens.

Someone rear ends you—hard—and then drives off. The back of your car is completely dented, and your neck isn't doing all that great either.

At least you won't have to pay anything for the damage, right?

Wrong. The bill comes, and it's $500.

If you have a deductible—and you almost certainly do—you'll need to pay that amount in full before the insurance company steps in. So if the bumper fix costs $512 and your deductible is $500, you pay $500 and the insurance company is only on the hook for $12.

Lucky them.

Generally, the higher your premium, the lower your deductible and vice versa. It's your call on which is more important.

P.S. Same goes for health insurance.