There are many factors to consider when choosing an auto insurance company, one of which is cost. Your auto insurance premium is weighed by many things, including your deductible. There are advantages and disadvantages of having a high versus low auto insurance deductible. Here’s some information to help you decide between the two.
First, what is a deductible?
Deductibles are there as a shared risk between you (the policy holder) and the insurance company. A car insurance deductible is the amount of money you pay to cover the cost of a claim. This could be damage caused by a collision or to fix a broken windshield. Typically, it will be a fixed amount, such as $250, $500, $1000, or $2000 – these are the most common deductible amounts. The higher the deductible the cheaper your monthly premiums.
How is the deductible applied?
Let’s say you were involved in an accident and the repair costs are $6000. If you have a $500 deductible, you are responsible for paying $500 for the repairs and your insurance company will provide the other $5500.
Now let’s turn this situation around and say you have the same $500 deductible and your windshield breaks. The cost to fix it is $500. In this situation, your insurance company will not pay anything and you will be responsible for the full amount.
Why a low deductible may be right for you
A low deductible is a great idea for someone living on a fixed income or simply unable to save money. Although the premiums are higher, it will help you if you find yourself in an accident and you have no available funds.
Why a high deductible may be right for you
Having a high deductible is great for people who don’t have a lot of money to pay out on a monthly basis as it reduces your auto insurance premiums. However, it would be a smart move to put any savings you have away just in case. If you have had a few accidents in the past, going down this route also allows you to work on minor claims yourself.
Be sure to ask your agent to give you a few quotes based on several deductible options to see which works best for you.
