It is one of the most often asked questions when dealing with car insurance. What is the right deductible for you? The deductible you decide on goes along way in determining the amount of your insurance premium. It is perhaps the easiest way to reduce your premium payments. Before you go and ahead choose the highest deductible possible to save money, there are a few things you need to evaluate first. Would you be able to afford a high deductible if you have to file a claim? Is it likely that you would file a small claim? How much money is in your bank/saving accounts?
To help you decide the proper deductible for your situation, lets evaluate three possible scenarios.
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You Have A Poor Driving Record
Let’s pretend your driving record is less than exemplary. You have a few speeding tickets under your belt, maybe an at-fault accident as well. Your recent driving history should factor into your deductible decision. With a poor record, you are going to face higher premiums. Auto insurance companies consider motorists with a poor driving record to be a higher risk. That said, you are less likely to file a small claim. Why? Because when you file a small claim, your insurance premiums increase. Since you are already paying high rates, most likely you won’t be submitting any small claims. Also, filing a small claim might mean the auto insurance company could consider dropping you.
Since you are not likely to file a small claim, it makes sense to carry a higher deductible. This will reduce your auto insurance premiums and the money you save over a few years would pay for the deductible difference.
You’re On A Tight Budget
You don’t have much disposable income. After the bills are taken care of, there isn’t much green left to spread around. Your credit cards are maxed out and you difficulty paying the minimum due each month. In this case, it makes sense to have a lower deductible. You need to be able to pay the deductible if you have to file a claim. If you don’t have much money to spare, it’s going to be hard to afford a $1000 deductible. Even though you will pay a higher premium (which doesn’t help that budget) you can’t risk not being able to afford your deductible. Keep that deductible low, and once you have saved up extra cash and paid off those credit cards, then you can consider raising it.
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You Drive An Expensive Vehicle
Since your vehicle is worth a great deal, it is more likely that you will file a small claim. Any scratch, broken mirror, etc. greatly depreciates the value of your vehicle. Since you already invested a lot into your auto, you are going to want to get it fixed. Plus, there is a pride issue. What’s the point of driving a sleek, hot car if it is all banged up? After all, you paid enough for it. Thus, you are going to want to make repairs, and could be wasting money with a high deductible. It’s all about the chance that you will file a claim. The higher the probability, the more you risk by carrying a higher deductible.
Perhaps none of the above situations applies to you. That’s fine, you can still learn from the examples. Take a close look at your bank account and the money you have available. Also consider that the car you want to have insured. What is the likelihood you would file a claim? No one can predict if you will have to submit a claim or not. But you can try and guess the probability (like the insurance companies do). Gauge the probability of filing a claim versus how much you would save on your premium . If you believe you can make up the difference of a higher deductible with lower rates, this might be the best option for you. If you see yourself submitting a small claim or two in the near future, go with the lower deductible.
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