Picking your car insurance deductible is a highly personal decision. It will not only depend on your personal comfort level but also how much of a risk you’re willing to take financially. Read on to learn more about how to choose your car insurance deductible and what you should be taking into consideration in the process.
What is a car insurance deductible, and how does it work?
Maybe you’re an insurance whiz and already know what a deductible is and how it works. But if you don’t? Not to fear. We’ve got you covered. To put it simply, if you file a claim with your provider after an accident, your deductible is the amount you’ll have to pay out of pocket before your provider starts dishing out funds for repairs.
It’s important to remember that your car insurance provider won’t require that you meet an annual deductible, unlike health insurance. Instead, you will be responsible for paying your deductible each time you file a claim. For instance, if you’re in an accident and your vehicle is totaled, your insurance provider will pay for your vehicle’s current value, minus your deductible. If your vehicle is worth $25,000 and your deductible is $1,000, then you can expect your insurance provider to dish out $24,000.
A low-deductible car insurance policy is good for these types of drivers
According to Kelley Blue Book, car insurance deductible amounts can run anywhere from a few hundred dollars, all the way up to $2,000. But, Kelley Blue Book reports, the most popular option is a $500 deductible. However, keep in mind that your monthly insurance rate may be higher with a low deductible plan.
That’s not to say you shouldn’t choose a low-deductible car insurance policy. If you own a cheap vehicle and are more likely to file a claim, Kelley Blue Book reports that a low-deductible car insurance policy may be the perfect fit for you. Low-deductible car insurance policies are also a fit for drivers that don’t have the savings needed to cover an unexpected bill after an accident.
A high-deductible car insurance policy is better for these types of drivers
If you’re less likely to file a claim with your car insurance provider, you may want to consider a high-deductible car insurance policy. Kelley Blue Book reports that a high deductible is a fit for drivers who are comfortable with taking a risk and have the savings needed to cover their deductible after an accident.
A high-deductible car insurance policy also means a lower monthly payment. However, you should keep in mind that while a high-deductible car insurance policy will be lower in monthly costs, you’ll pay more out of pocket if you do end up filing a claim with your insurance provider.
How likely are you to file a claim with your insurance provider?
In the end, choosing your car insurance deductible comes down to how likely you are to file a claim with your insurance provider. Of course, how much of a risk you’re willing to take should also contribute to your decision. If you don’t foresee getting into an accident and have the means to cover a higher deductible, then, by all means, go for it. But if you don’t have the savings to cover a high deductible? Then you should probably stick with a low-deductible policy.