Lowering
your auto insurance rates is a delicate balance between choosing the
correct coverage and selecting a deductible that works for your
budget. If you're not sure whether you should buy a new policy or
keep things as is, take a look at what you need to know about
changing your deductible.
What
Is a Deductible?
Whether
you're new to buying auto insurance or just aren't sure what the
terms mean, understanding the jargon is a first step to getting a
policy that fits your needs. If you don't know what the agent is
talking about — especially with coverage, deductibles, and payments
— ask before agreeing to anything.
The
deductible is the money or percentage you pay yourself for repairs
once you’ve filed a claim. In most cases, the policy will require a
specific dollar amount per claim. This means if you pay your $500
deductible for one at-fault accident, you'll still likely have to pay
it the next time you file a claim.
When
Do You Pay a Deductible?
Again,
the deductible is a by-claim cost. If you remain accident-free, you
won't have to ever worry about your deductible. That doesn't mean you
should rely on your safe driving as a reason for raising your
deductible.
Along
with paying the deductible after an accident, you may need to pay it
following damage from vandalism or a natural disaster. The specific
costs that qualify as deductible expenses depend on the policy. Talk
to your insurance agent about costs you're responsible for versus
what the policies cover.
Is
a Low or High Deductible Better?
Different
deductible options come with different pros and cons. A lower
deductible means you'll pay less following an accident or another
type of damage. While this may sound like the perfect option, it may
come at a price. Low deductibles often equal higher coverage rates.
If you don't need to use the coverage, you'll pay more over time.
A
higher deductible has the opposite effect. Instead of raising your
rates, it will likely lower it. If you remain accident- or
incident-free, you'll pay less over time. But if you do need to use
your coverage, you could pay much more for repairs.
You
have no way to know how much you'll need to, or not need to, use your
insurance. This makes choosing a deductible challenging for some
drivers. If you're not sure which way to go, consider a
middle-of-the-road approach. Split the difference and choose a medium
deductible that's not too high but not so low that it makes your
overall rate skyrocket.
What
Else Should Drivers Consider When Choosing a Deductible?
You
want to lower your premium rates and have already maxed out any
available discounts. Should you go ahead and raise your deductible?
Before changing your deductible, consider the other factors that go
into your payments. These might include:
-
Savings.
If
you have a sizable savings or emergency fund, you may already have
the money available to pay for damages your policy won't cover. This
may allow you to raise your deductible and pay lower premiums.
-
The actual
costs.
An
already-low premium may not get much lower by changing your
deductible. A minimal per-month or per-year change in your premium
probably won't equal out with a deductible change.
-
Vehicle
value.
Is
your car brand-new or ready for the scrap yard? An older or
low-value vehicle may not warrant a repair — making a low
deductible unnecessary.
Your
insurance agent can discuss what impacts your coverage and your
deductible the most. Depending on the policy, the agent may help you
to find other potential considerations that will influence your
decision.
Do
you need a new insurance agent? Contact Harr
& Associates Insurance, Inc.,
for more information.
