Choosing Your Auto Insurance Deductible

Auto Insurance DeductibleIf you're trying to save money on auto insurance, one way to do this is to increase the size of your deductible, the amount you pay out-of-pocket when you file an insurance claim. This works because the greater your deductible is, the lower your premiums will be. The easiest way to do this is to choose your deductible when you set up a new policy, or renew an existing one, but what are the options, and how do you make the right choice?

Most car insurers offer a range of deductibles that start at $100 and go up to $1,000. Common options between those are $250 and $500. Some insurance companies offer zero-deductible policies (this is often true of collector car insurers) while others offer amounts in excess of $1,000. Usually, you're free to choose from any option they offer, you just can't make up an arbitrary amount. This is because premiums are pre-calculated based on the most common selections. Zero-deductible policies on daily-driver, mainstream cars are almost always incredibly expensive. Avoid these unless you're certain you can afford them.

In order to determine what deductible is the best for you, consider your personal finances, including savings and regular salary. If you don't have a lot of money in the bank, but earn decent wages, a lower deductible may be better for you, since you won't have the cash to pay a larger one in the event of an accident claim. If you have a decent amount of savings, and are more concerned with a lower monthly premium, go with the higher deductible.

Most insurance agents will tell you to take the highest deductible you can, and then start a savings account with the money that would otherwise have gone to pay premiums, in case you ever do have an accident. They'll also tell you that it can be less expensive to pay for minor damage - dents and dings, for example - in cash, rather than filing a claim.

Ultimately, the choice between deductibles is up to you, but since you may never actually have an accident, it's usually better to keep deductibles high, and premiums low.

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