Choosing an Auto Insurance Deductible

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When you buy insurance, you want the process to be as easy and affordable as possible. But you also want to make sure you get the right coverage, and that should an accident or other incident occur, that you aren’t left wondering how to cover the cost of your deductible. 

Your car insurance deductible is a major consideration when buying auto insurance. Not only does it impact the amount of money you pay for your annual premium, but it also decides how much you’ll need to find should you have an accident. 

Essentially, the higher the deductible you’re willing to put up, the lower you’re going to see the annual cost of your auto insurance. However, choosing the right deductible needs to carefully balance what an affordable premium vs. how much you will need to find is should you need to pay your deductible in full. 

In this post, we will walk you through the options to offer a little clarity to an otherwise cloudy topic. 

What is the definition of an insurance deductible?

An insurance deductible is the amount of money you’ll need to pay if you make an insurance claim before your coverage kicks-in. 

Do health insurance and auto insurance deductibles work in the same way?

Many people are familiar with how health insurance deductibles work, but auto insurance deductibles are a little different. Essentially, a car insurance deductible works on a per accident basis, while health care deductibles work on an annual basis. 

For example, if your health insurance deductible is $2000, once you have paid that amount out for the year, there is nothing to pay until the following year. However, with auto insurance, if you have a $2000 and you are involved in an accident, you would have to pay the full amount first before your insurance actually kicks in. If there’s a second accident during the same policy year, then you will need to pay out the $2000 all over. 

How much do deductibles cost?

The cost of your insurance deductible can determine the cost you will pay for your insurance. However, you have the ability to change the amount of your deductible but knowing how much to change it to is often a sticking point for many. If you opt for a lower deductible, your car insurance costs will be higher, and if you go for a higher deductible, you would then benefit from a lower premium. 

It is possible to change your deductible during your coverage term, but you can expect to pay a fee to do this.  

Who needs an insurance deductible?

Usually, an insurance deductible is required for comprehensive, collision, and underinsured/uninsured motorist coverage.  If you are simply looking to buy auto liability insurance to cover your state’s minimum coverage requirements, then a deductible won’t apply. 

When can you not pay out a deductible?

There are a number of incidents that may occur which do not require you to use your deductible. 

#1 Glass Repair Claims

The majority of glass repairs will be covered under comprehensive auto insurance. However, if you need to replace windshield glass, then some states will ask you to pay a deductible for this.

#2 Non-Fault Accident

If the other party is found to be at fault, then their insurance company would pay for the damage. If there is not enough insurance in place, or no insurance at all, then this is where uninsured or underinsured coverage will take effect. 

#3 Liability Claims

There are no deductibles for liability coverage; instead, there are limits that you choose to set high or low. 

The Best Way to Choose your Deductible Amount

Choosing the right level to set your deductible will depend on your individual situation, and in most cases, the budget is the overriding factor. Here are a few things to consider before deciding which amount is best for you.

#1 What is the value of your vehicle?

If your vehicle isn’t worth a lot of money, then you might not want to pay for comprehensive or collision coverage. As we’ve already covered in this post, if you don’t have this coverage, then you won’t have a deductible.

#2 Do you have a nest-egg or emergency pot of funds?

It’s tough trying to save money, but very often worth the effort. Consider if you were in an at-fault accident; would you have readily available funds to cover the additional costs? Would you even want to dip into these savings for the sake over something a lower deductible would have covered?

#3 Not always within your control

Nobody can predict what’s going to happen in the future. So, although choosing a higher deductible could give you lower payments, accidents happen, they’re never planned, and regardless of how safe a driver or how experienced you are, you may end up with a lump-sum payment to find before any insurance kicks in. 

Final Thoughts

As you can appreciate, the main factor to consider when choosing a deductible is the cost. Not just the monthly insurance premiums, but whether or not the deductible is going to be affordable to you if you need to raise the money fast. Add to this the fact that you might need to pay the deductible more than once in a year, and you can start to see why affordability is the most pressing consideration. 

We’re Here for You

We want to help you find the best auto insurance. If you contact us directly, our team will be happy to offer guidance about the different types of coverage you might need to buy; we can also get prices from the best insurers and present you with a range of options to choose from. 

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