How To Make A Choice Regarding Deductibles On Auto Insurance
Picking a deductible for an auto insurance policy can be a confusing process if you've never thought about the problem before. Most auto insurance agents can offer deductibles at different levels, such as $250, $500, and $1,000. Which deductible is the right one for you, though? You can break the issue down into these four components.
What You Can Afford Out of Pocket
Foremost, you always want to have a deductible that's less than what you know you can reasonably afford to pay out of pocket. If an accident happens, you're on the hook for whatever amount the deductible is. Suppose your car suffered $4,000 worth of damage while you had a deductible of $1,000. The auto insurance company is likely going to pay $3,000 for the cost of repairing or replacing the vehicle.
When something happens, the key is that you have the money to cover your portion of the deductible. Budget your deductible based on what you expect would be the worst financial situation you might face in the coming year. Give yourself a little fudge room, too, because bad things run in packs. If you have to use your deductible money to buy a new refrigerator, that's a problem if your car subsequently ends up in an accident.
Driving Challenges
How and where you drive matters, too. If you commute to work through an area where you see fender-benders every day, you might consider a lower deductible to replace busted parts like mirrors or corner panels. The same argument applies to driving in areas with high rates of theft and vandalism. Even folks who live in the nicest places around can hit a deer, for that matter. If you expect to use your insurance fairly frequently, a lower deductible could curb your outlays for multiple accidents.
Vehicle Value
If you can afford to replace your vehicle with money on hand or available financing, you may want to carry a high deductible. Especially if the car is old or not in great shape, you might just plan to drive it until the wheels fall off. In that scenario, there isn't much argument for spending heavily on auto insurance premiums when the deductible might be a sizable portion of the car's value.
State Regulations
Some states require drivers to carry minimal deductibles. Check the website for your state's Department of Transportation or call the nearest state police barracks to ask what the rules are where you live. For other questions, contact a local auto insurance company.