Who Needs High Auto Insurance Deductibles

First, let’s make sure you understand the purpose of your auto insurance deductible.
Similar to a health insurance deductible, an auto insurance deductible is the amount of money you pay before you car insurance coverage kicks in. It’s the part of the auto insurance policy you’re responsible for paying.
You might think, “Wait a minute. I thought the part I was responsible for paying was the auto insurance premium?” Well, that’s true, too. However, the premium is your monthly (or yearly) payment that keeps your policy―and the large payout it’s capable of―in place. The deductible is the payment you make that covers damages up to a certain amount before that large payout kicks in.
Generally, you can choose your own deductible, and most companies offer deductible choices of $100, $250, $500, and $1,000.

 

High Auto Insurance Deductibles Explained

It’s a pretty simple explanation, really: The higher the deducible, the lower the premium.

That means if you can swing it, signing up for a higher out-of-pocket payment in the event of an accident will allow you to save money each month (or year) on auto insurance premiums.

 

When to Have Higher Car Insurance Deductibles

Consider choosing a higher car insurance deductible if:

• You need lower monthly premiums. Because higher deductibles mean lower monthly premiums, sometimes they’re a good choice for folks who work low-income jobs or who have many other monthly bills to take care of.

• You drive infrequently. The less you drive, the less likely your vehicle will sustain damages.

• You drive seasonally, but keep insurance on your vehicle all year “just in case.”

• You need additional kinds of coverage. Say you want to purchase emergency roadside assistance but you haven’t yet been able to afford it. Increasing your deductible and lowering your premium could save you enough cash to add the emergency roadside coverage.

• You’re interested in avoiding filing auto claims. Higher car insurance deductibles can help you cut back on the number of claims you file, if the damage in question costs less than your deductible. For example, if you have a $1,000 deductible and back your car into a tree, chances are you’ll be able to repair the damage for way less than your deducible. No claim necessary. Even better news is that you can avoid the increase in rates auto claims often bring.

IMPORTANT: If you choose to select a high auto insurance deductible, make sure you have set aside the amount it would take to pay your deductible if necessary, or to pay any out-of-pocket expenses to cover damages that don’t reach or exceed the amount of your deductible. Otherwise, if an accident or damage does happen, you haven’t really saved yourself any money at all.

 

When You Have No Choice About Your Deductible

Generally, you can choose however low or high a car insurance deductible you want; however, in certain situations, you might not have much of a say.

For example, your deductible might be set for you (or, at least within a ballpark range) if:

• You’re considered a high-risk driver.

• You financed your vehicle and have a lienholder to appease.

• You leased your vehicle and have a lessor to appease.

Keep in mind, though, that you can always shop around and compare quotes from multiple providers if you’re not happy with the premiums you’re paying now.