Choosing The Right Auto Insurance Deductible

What deductible would you like — $250, $500, $1,000, $1,500? You’ll notice that is one of the questions we ask you when you’re looking up a free auto insurance quote online. Your answer to this question could save you as much as 40 percent, according to the Insurance Information Institute. By assuming more risk, you stand to save a lot.

What Is A Deductible?

In the world of auto insurance, a “deductible” refers to how much money you are willing to pay, should you get into an  accident. The deductible is the amount you pay before your insurance protection kicks in. So, if you rear-ended someone and caused $10,000 worth of damage, a $1,000 deductible policy would mean that you pay for the first $1,000 out of pocket and insurance will cover the other $9,000. Of course, when you file a claim, your premium will likely go up. Some people with high deductibles will not even bother to file a claim for something like a broken window or cosmetic damage from a hit-and-run.

When To Choose A Higher Deductible For Auto Insurance

Most personal finance experts would advise you to save a cushion in your bank account and opt for the higher deductible. If you have good credit and access to low-interest loans or more than $1,000 in your savings account, this is wise. If you are a relatively good driver with a clean record and rarely — if ever — get into an accident, then you are the prime candidate to reap great savings with a higher deductible.

When To Choose A Lower Auto Insurance Deductible

On the other hand, some people are not very financially disciplined and rely on a bi-annual bill in the mail to help them sock away savings. These people would need a low auto insurance deductible to ensure they are fully covered. If you’ve ever needed to file more than one claim per year, you will want a lower deductible. If you have young drivers on your policy, live in a high-crime urban area, or live in a place that is constantly struck by natural disasters, you will probably want to pay a little more on your premium to know that you are covered for multiple events each year.

Choosing The Right Auto Insurance Deductible 1
Lots of disasters in your area? Better stick with a low deductible unless you have a good savings cushion.

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