Auto Insurance Deductibles

As a car owner, there are several ways you can reduce your auto insurance premiums. One of the most reliable ways is by taking advantage of deductibles. In simple terms, a deductible is the amount of money you are willing to pay towards the repair of your car should you be liable for causing an accident. As the policy holder, you have the freedom to decide how much your deductible should be.

If the damages to your car are less than your deductible, then you will end up paying the whole bill by yourself. The insurance company will only step in if the amount of damages exceeds the deductible. In this case, they will pay for the damages minus the deductible. 

For example, consider someone who has a $500 deductible on their policy. In one scenario, the damages amount to $300. In this case he/she pays the full amount. In another scenario, the damages amount to $1500. In this case they will pay the $500 and the insurance company will pay the balance of $1000. If another driver is at fault, their insurance company should pay you for damages, and therefore you won’t pay the deductible. If you choose not to repair your car, the insurance company will give you a check to cover for damages minus the deductible. 

When you choose to add a deductible to your auto insurance policy, you are choosing to take on some of the risk. For this reason, the amount of premiums you pay will definitely decrease. The general trend is that the more the deductible, the lower the premium. An important thing to note is that the deductibles usually cover damage to your car, rather than someone else’s car.

Deductibles are often offered on most of the car insurance policies, with most people preferring to take one on comprehensive and collision covers. It is often a good practice to set a higher deductible on the more expensive covers such as collision coverage, while setting a lower deductible on a cheaper cover such as comprehensive. 

Up to this point, we can agree that a deductible is a good idea. The only question that then needs answering is; how should I decide on the amount of the deductible? Consider the following factors:


1. Your Income and Savings
In simple terms, choose a deductible you know you can comfortably afford even in emergency situations. The last thing you want is for your car to be sidelined for a long period of time simply because you cannot afford to pay your deductible.


2. Your Safety Record
If you are a careful driver who has never been in an auto accident, it is a good idea to choose a high deductible amount. This is because it will lower your premiums significantly, but the chance of ever having to pay it will be low. 


3. The Value of the Car
More expensive cars often require higher premiums. In order to make significant savings, you can opt for a higher deductible. For an older, less valuable car, the better idea would be to pay a lower deductible.