Auto Insurance Deductibles Demystified!
Figuring out the correct deductible amount for you should not be a mystery. There’s a relatively simple way to determine the deductible that fits your personal situation. For those who aren’t familiar with the term “deductible”, this is the amount the insurance company deducts from the damage cost because you are responsible for paying it. In essence, it is the amount of risk you are willing to accept.
Deductibles normally range from $250 to $1,500 per accident, depending on your state insurance regulations and what level of coverage you choose. Deductibles apply to collision and comprehensive coverage. For cars worth $5,000 or less, comprehensive and collision insurance may not be a good investment, but if you are financing your car, the finance company will specify your minimum insurance and deductibles.
Here’s an Example…
If you have taken a $500 deductible and there is an accident, you are responsible for paying up to $500 out of your own pocket. The insurance company will then pay any additional cost to repair your vehicle. If the damage is $500 or less, you pick up the full tab. Even when the damage is just over your deductible, many choose not to file a claim because each claim increases your monthly premium.
Why Would You Want a $500 Deductible?
Lower deductibles make more sense when you:
- Don’t have a lot of money set aside in an emergency fund.
- Have had several accidents, whether or not you were at fault.
- Live in a city or a place where accidents and natural disasters are fairly common.
Remember: The monthly amount you save on your premiums by raising the deductible may not be enough to justify the risk. Find out what the difference would be and investigate the cost to come up with the deductible in case of an accident. If you need to pay more out-of-pocket to repair your car, you may lose any savings you would see from a higher deductible.
When Would You Want a $1000 Deductible?
Higher deductibles make more sense when you:
- Want to save money on your monthly premiums.
- Have very few or no accidents.
- Aren’t bothered by the idea of assuming a higher out-of-pocket risk.
Talk to one of our insurance experts to help you decide on the right deductibles for your car. Answer Financial is one of the largest online auto & home insurance agencies in the U.S., with over 2.4 million vehicles and homes insured. There is a lot more useful info available on our site.