Anyone who is shopping for auto insurance knows that one of the great debates is how high or low to set your deductibles. Having a low deductible is of course ideal in the event of a covered claim or accident. However, you’re going to pay a bit more for it in your premium. So you may try and increase that deductible in order to get your premium down. But when are you crossing the line and leaving yourself open to too much risk?
There’s no right or wrong answer for everyone. However, you can use the tips below to help you determine what deductible amount is right for you and your auto policy.
Avoid Extremes
A really high deductible is going to leave you open to a lot of risk in the event of an accident or other covered claim. For example, if your collision deductible is $2,500 and you cause an accident tomorrow- be prepared to pay $2,500 out of pocket for your damages before your car insurance company will pay towards the claim. However, if you set your deductibles as low as $50, you may see your premium increase considerably. To be on the safe side, try to stay in the “middle of the road” (figuratively speaking of course!) that way you aren’t leaving yourself open to considerable risk in the event of an accident, but you’re not draining your wallet on monthly premiums either.
Keep it comfortable
When deciding what deductible makes sense for you and your family it really comes down to your financial situation. If you typically have enough extra funds in the bank to cover a $1,000 deductible in the event of a claim without it causing financial struggle for you, then that might be a comfortable deductible. On the other hand, if that same $1,000 deductible would set you back considerably- you might want to opt for paying a few more dollars each month and go for $500 deductible.
Know your Risk
While no one can ever know when an accident will happen, some people may pose a higher risk for accidents than others. For example, if you have 2 teenage drivers living under your roof, you are typically going to be at more of a risk for fender benders than a middle aged couple that doesn’t drive often. A family with inexperienced drivers may therefore opt for a lower deductible and slightly higher premium in order to cover their finances in the event of a claim.
Understand your Coverage
Before making any decisions about your deductibles make sure you talk to your agent about what is included in all of your coverage options. For example, if you select a $500 deductible and full glass coverage for your comprehensive coverage, does that deductible apply for a glass claim? If so, you might end up paying for a new windshield out of pocket since they typically cost less than $500. Some companies waive the deductible for a glass claim. Talk to your agent about the specifics so that you know exactly what you are purchasing.
Be Prepared
Whatever your deductibles may be, it might be a good idea to always make sure you have that extra money somewhere in the event that you need it. For example, if your comprehensive and collision deductibles are set at $500, it might be wise to make sure you always have $500 available in your savings account. That way, you always have that extra cushion and you don’t have to worry about coming up with the funds in the event of an accident.
For more information, read: Factors that affect your auto insurance premium
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