6 Tips in Picking Your Auto Insurance Deductible
Determining two things will help you pick your auto insurance deductible: your personal comfort level and the amount of risk you are willing to take. Ultimately, this is a personal decision that you should make, not your insurance agent. Answer the six questions below to make an educated decision and pick the right deductible for you and your family.
1. How healthy is your emergency fund?
Consider your bank account when picking your auto insurance deductible. Is it healthy or depleted? If you take a $1000 deductible, you should be prepared to pay for it in case of an accident or repairs. Otherwise, it will not be helpful if you have a claim and cannot afford it.
2. What is your car’s value?
An expensive vehicle costs more to insure. For more savings, consider a high deductible for a high value vehicle. Otherwise, it does not make sense to carry such a high deductible, especially if you have an aging vehicle. For example, a decade’s old car with comprehensive coverage should not come with $1000 deductible since the value of the car is within a couple of thousand dollars of the deductible and the savings will not amount to much.
3. How much do different deductibles cost?
Often, agents lure you with the promise of savings. Calculate so you know if it is worth it. If you can save $500 in premium in three years, it might be better to have higher deductible. However, if it will take over three years to recoup your money, just go with a lower deductible.
4. What is your driver risk?
No matter how good of a driver you are, there will always be a risk. What are your chances of having a claim? Think about your driving habits and the areas you frequent. If the likelihood of having a claim is high, choose a lower deductible. Otherwise, you can earn significant savings with a high deductible.
5. Will you benefit from vanishing deductible?
People have conflicting opinions about vanishing deductible, but to make it simple, it is a good option if you struggle keeping your emergency funds healthy. Otherwise, grow your emergency fund and you should be okay.
6. Will you benefit from choosing a different deductible for different coverage?
You have options here. For example, comprehensive coverage is cheaper so a lower deductible makes sense. Collision coverage, on the other hand, is expensive, so a higher deductible may be better. But the simplest way to do this is to keep the same deductibles on all your vehicles. Opting for different coverages is okay if you can stay on top of it. Know what your deductibles are and be prepared to pay for it. This will simplify the process of picking your auto insurance deductible.