While everyone needs car insurance to uphold laws and to ensure protection in the event of an accident or other unforeseen car-related problem, no one wants to pay a lot of money to get that protection. There are a few ways you can modify certain parts of your coverage to get low auto insurance rates. One of the things you can modify is your comprehensive and collision deductible. By increasing your deductible, your insurance premium will decrease. Because you will accept more financial responsibility in the event of an accident, the insurance company does not have to build your premium quite as high. So, if you have a lower deductible, you will have a higher premium, but less out-of-pocket cost for claims or repairs. If you have a higher deductible, you will have a lower premium, but a higher out-of-pocket cost.
The deductible amounts insurance companies offer on comprehensive and collision coverage vary by state, but you will likely be able to choose from the following dollar amounts: $100, $200, $500 or $1,000. Depending on which one you choose, that will be the amount you will have to pay out of pocket in the event of a claim or repair. So, if you get in an accident that causes $5,000 worth of vehicle damage and you have a $500 deductible, you will pay $500 for those repairs and your insurance company will pay the $4,500 left over. But, if you carry the $200 deductible, the insurance company will be left paying $4,800, so your premium is higher to cover this expense.
How do you decide which deductible to choose?
It depends on how much you are willing to pay for your premium versus how much you are willing to pay if something does happen and you need to get the money for that deductible. Some things you should consider are:
- Income
- Credit
- Savings
- Car’s age
- Driving history
When thinking about your income, available credit, and savings, ask yourself this question: If you got in a car accident today, how much could you pay? Unless you want to gamble, it is not a great idea to get a higher deductible especially if it’s out of your price range. On the other hand, if you bought your car insurance several years ago with a $100 deductible and, due to improved life circumstances (such as getting a better job) you can now afford a $500 deductible, go ahead and call your insurance company to increase it and get a lower premium.
Another important item from the above list is driving history. If you have been driving for several years and have never gotten in an accident or have only experienced minor fender benders, you may be able to take the risk in getting a higher deductible. If you have found yourself frequently involved in accidents and have caused damage to you or the other driver’s car, reconsidering your deductible might be the best choice. Low auto insurance rates will not help you if you find yourself routinely having to pay a $500 deductible that you cannot afford.
Risk factors should not be overlooked when looking at a deductible. Are you willing to risk taking on a large deductible in the hopes that you will get in an accident? Ideally, auto insurance should give you peace of mind, rather than make you worry. If having a high deductible would cause you to have to strain or compromise something important in order to pay it, you might want to go ahead with the lower deductible and accept the higher premium. However, the choice of choosing a higher deductible is a great way to get low auto insurance rates.