When you are buying insurance for your car, one of the major things you will need to decide on has got to do with the deductibles. There exist several factors that will affect your decision on car insurance deductible. But, why do car insurance companies charge a deductible and what is it?
What’s a deductible?
Well, a deductible refers to the sum that you pay from your own pocket when you want to file your claim. For instance, your insurance provider may offer three deductible levels: $1000, $250, and $500. Assume you choose the $250 deductible. In that case, you would end up paying $250 of the repair costs if your car gets damaged and you want to file any claim.
An insurance company charges deductibles to put off people from making nuisance’ claims of fairly small amounts. The objective is to pay for vital claims as well as to look after small items by using your insurance.
The smaller the deductible you pick, the higher your yearly premium. But, are the yearly savings really worth that extra risk? Well, it depends. You might want to take higher deductibles into consideration if the increased risks can be recouped through premium savings in a given amount of time (basically 4 to 5 years). Here are some important things to take into consideration when choosing car insurance deductible.
- Can you afford your deductible?
The amount of money you can pocket out if you are involved in an accident ought to be the first thing to take into consideration when choosing a deductible. Most insurance companies have different deductible levels for people to choose from, with most ranging from 0 to 1500 dollars. The amount of premium you pay is directly influenced by the amount of deducible you pay; generally, the lower the deductible, the higher your premiums are. Then again, if you pick a higher deductible, the premium is most likely to be higher as the insurance company will be requiring more money to cater for the repair your car if it’s damaged.Even though it’s going to be lower your premium, a higher deductible doesn’t really matter if you can’t afford to cater for damages that have affected your car in the event of an accident. Therefore, if you choose on a $1,000 deductible you will need to be ready to folk out that amount when the time comes. It is only who will be able to tell if you are really comfortable paying that amount.
- How much is your car worth?
Aside from the financial aspects that are taken into consideration, the value of your car also makes a huge difference as far as the amount of deductible you pick is concerned. Usually, it is great to follow this easy and simple rule: the classier your car, the more it is likely going to cost in order to have it insured. Similarly, if a car is 10 years old, it does not financially make sense to carry a huge deductible, because the cost of repairing it might just be several thousand dollars above the deductible itself.
- Risk factors
Do you regularly travel through highly travelled road stretches or very busy intersections? Do you have a new driver or teenager on your policy? Are you fond of driving during peak hours? All of these factors can create a very high chance of a car accident, and as a result, you may be somewhat better off with a low deductible, since a deductible is payable on each claim that’s filed. Have in mind that some insurance companies need a deductible that is above a certain amount should they happen to consider you as a high risk driver.
What’s good for you?
There are certain formulas you can use to determine the pay-back period for any premium/deductible combination. The numbers are of course not the only aspect to take into consideration. You’ll also need to be very realistic on matters of how financially able you’re to consider any extra risks. For example, might it be quite hard for you to pay a $1000 lump-sum deductible if you end up being involved in an accident compared to paying an extra $150 in premiums each year?
To find the best solution that is ideal for you, it is good to consider working with insurance advisors that can be trusted, and work via all the deductible/premium combinations reach at a policy which avails all the protection you want. With all these in mind, you surely won’t have any problems when making your car insurance deductible decision.