When you are buying insurance for your car, one of the major things you will need to consider is the deductible. There are several factors that will affect your decision on choosing the right Car Insurance D
What’s a deductible?
Well, a deductible refers to the amount 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. An insurance company charges deductibles to put off people from making nuisance’ claims of fairly small amounts.
How much should your deductible be?
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 pay out of pocket if you are involved in an accident should 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. The amount of premium you pay directly influences the amount of deductible you pay; generally, the lower the deductible, the higher your premiums are.
If you pick a higher deductible, the premium is most likely to be higher because the insurance company will require more money for the repair of your car. Even though it’s going to 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 fork 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 choose. Usually, it is great to follow this easy and simple rule: the classier your car, the more likely it is going to cost in order to insure it. Similarly, if a car is 10 years old, it doesn’t make financial sense to carry a huge deductible. The cost of repairing it might just be several thousand dollars above the deductible itself.
What is your risk for filing a claim?
Do you regularly travel through highly traveled 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 high chance of a car accident, therefore, you may be better off with a low deductible policy, since your chances are having an incident is higher. Have in mind that some insurance companies need a deductible that is above a certain amount should they happen to consider you 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 in an accident, compared to paying an extra $150 in premiums each year?
To find the best solution that is ideal for you, work with a trusted insurance advisor and go over all the deductible/premium combinations policies to find which will work best for your situation.