Benefits Of Increasing Car Insurance Deductibles

Next to selecting specific car insurance coverage, your second most important decision will be deciding the size of your deductible. The deductible amount you choose could make a difference of several hundred dollars on your annual insurance premiums.

 

Car Insurance Deductibles Defined

For the sake of clarity, an auto insurance deductible is the amount of money you pay out of your own wallet, before your car insurance company begins paying the additional costs.
For example, if you have a $500 deductible and the estimated damage to the car you hit is $1,300, you would pay $500 and your insurance provider would cover the remaining $800.

 

The Benefits of Carrying Higher Deductible Auto Insurance

Because a deductible represents how much of the initial car repair or injury costs you're willing to pay, it carries weight in determining your insurance premiums. The higher the deductible you choose, the more money you save on car insurance rates. Depending on your provider, the difference between, say, a $250 deductible and a $1,500 deductible could be as high as $500.
Break this figure down by 12 months and you're saving over $40 a month on car insurance. Over a three-year period that adds up to $1,500―enough money to buy 1,200 DQ Dilly Bars.

 

Choosing a Car Insurance Deductible Amount

The deductible amount is your decision. To help you decide on a deductible amount that best fits your situation, ponder the following questions:

• What are the chances of you being involved in a car accident?

• How large is your savings account? If it's $12,000 you could then easily afford a $1,500 deductible. On the other hand, a $1,500 deductible would not be a wise choice if all you had in your savings account was $421.

• Will the premium savings validate the risk of a higher deductible? If you're a low-risk driver with a spotless driving record and the premium savings are substantial, it may be worth your while to opt for a higher deductible.

Whatever you decide, be certain you can afford your decision. If you can't pay your deductible, the savings you earned on your premiums will serve no purpose. Your insurance provider will not pay a single dollar until you cover your deductible.