Your Car Insurance Deductible Explained
In this video, we explain what an auto insurance deductible is and how to determine the deductible that best fits your personal situation. Visit https://www.answerfinancial.com/ and experience the smart way to compare, buy and save on car insurance.
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For those who aren't familiar with the term deductible, this is the amount the insurance company deducts from the damage cost – because you are responsible for paying it.
In essence, it is the amount of risk you're willing to accept. Your car insurance deductible will normally range from $250 to $1,500 per accident, depending on your state auto insurance regulations and what level of coverage you choose.
Having a lower deductible, like $250, will mean your insurance premium will be higher. Conversely, having a high deductible, like $1,500, will translate to having a lower premium.
If you are financing your car, the finance company will specify your minimum insurance and deductibles. Here's an example of how it works.
If you've taken a $500 deductible and there's an accident, you are responsible for paying up to $500 out of your own pocket. The insurance company will then pay any additional cost to repair your vehicle. If the damage is $500 or less, you pick up the full tab.
Why would you choose a low deductible?
Lower deductibles make more sense when you:
➤ Don't have a lot of money set aside in an emergency fund
➤ Have had several accidents whether or not you were at fault
➤ Live in a city or place where accidents and natural disasters are fairly common
When would you choose a higher deductible?
Higher deductibles can make more sense when you:
➤ Want to save money on your monthly premiums
➤ Have very few or no accidents
➤ Have enough money set aside to be comfortable assuming a higher out-of-pocket risk in case you are in an accident
Remember the monthly amount you save on your premiums by raising the deductible may not be enough to justify the risk. Find out what the difference in premium would be and compare it to the cost to come up with the deductible in case of an accident.
If you need to pay more out of pocket to repair your car, you may lose any savings you would see from a higher deductible.
Visit https://www.answerfinancial.com/ or call us at 1-866-635-7777 to speak with one of our auto insurance experts to help you decide on the right car insurance deductible for you and your car.
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