When it comes to the ideal car insurance, there are many things to consider to ensure that you and your vehicle are fully protected. One of the most crucial choices is the amount of deductible you want for your policy. This decision will have a considerable impact on your monthly premium and the amount you will have to pay out of pocket in the event of an accident. Use the following three tips to help you choose the perfect auto insurance deductible amount.
Choosing the right car insurance deductible
A car insurance deductible is the amount of money that you, the policyholder, are responsible for paying out of pocket in the event of an accident before your insurance company intervenes. In other words, it’s the amount you will have to pay if you ever have to make a claim. Choosing the right deductible can be tricky – set it too low and you might pay too much for your coverage, but set it too high and you might not be able to meet your payments if you make a claim.
The perfect deductible amount is different for everyone and depends on various factors specific to each driver. According to Erie Insurance, here are three key things to remember when choosing the ideal auto insurance deductible.
1. Your budget
When choosing an auto insurance deductible, the most crucial factor to consider is your budget. Ask yourself a simple question, how much can you afford to pay for an emergency repair or a minor accident? If you select a lower deductible, you will only have to pay a small amount out of pocket when you file a claim. However, your overall insurance premiums will be higher.
If you have a higher deductible, you will pay more money up front in the event of an accident. But, your monthly insurance premiums will be lower. Motor1 recommends choosing a higher deductible only if you can afford it and want lower premiums. It’s all a matter of budget and personal preference. Be honest with yourself when considering what you can afford, and be sure to factor your deductible into your auto repair budget.
2. Driving time
How often do you use your car? Consider how much time you spend driving daily or weekly. If you rarely drive, chances are you won’t need to make a claim very often. In this case, you may be able to afford full insurance coverage with a higher deductible, because you probably won’t need to use it very often. However, if you are on the road often, you are more exposed to the probability of an accident. Therefore, it might be better to consider a lower deductible in the event of an accident.
3. The value of your vehicle
The value of your vehicle will also come into play when choosing an auto insurance deductible. The more expensive your car is, the more it will cost you to insure. A high deductible is preferable in such a scenario as it could help you save a lot on your premium. Unfortunately, some insurance lenders may specify a limit that your deductible cannot exceed, especially if you got a car loan.
On the other hand, if you have an older vehicle that isn’t worth much, it may not be worth getting comprehensive coverage or collision coverage. In this case, a lower deductible will suffice as your cost of insurance would be relatively low.
Remember that, whatever deductible you choose, it is best to always have the amount on hand in the event of an accident. You don’t want to be in a situation where you can’t pay your deductible and have to pay the full cost of repairs out of pocket. The ideal car insurance deductible is different for everyone, but by considering these three essential factors, you can make an informed decision that’s right for you.
RELATED: Will your insurance cover an accident if someone else is driving the car?