Generally, the higher the deductibles the cheaper rates are. However, this statement doesn’t really answer what is a good deductible for car insurance and leaves many questions unanswered. Under what circumstances it is a good idea to have higher deductibles or when you should not increase them are some of those questions? Below a few recommendations are considered to shed a light to question of at what level they should be set? By the way, how do automobile insurance deductibles work is explained in detail in another post.
Is a Lower Car Insurance Deductible Better?
According to studies and surveys more than half of motorists look for lower deductibles when they are searching policies. If you can get them lower for the same price, it would be great. However, what we are discussing here is not about what we would ideally like. It is about saving money using deductibles, right? It is true that you can save money by increasing them with most auto insurers. It is worth pointing out that you should make sure you are getting worthy savings for taking more risk.
When Is High Deductible Auto Insurance Beneficial?
Increasing them would be a valuable tool for people who are in a tight budget situation. Maybe they are considering dropping Collision and Comprehensive coverage because premiums are too expensive. Alternative option would be to raise the out of pocket expense (in case of a claim) and keep the coverage if you can achieve sufficient savings. With some companies you may be able to save couple of hundred dollars by raising deductibles five hundred dollar more on Collision and a little less on Comprehensive. In other words, such an increase would yield lower premium car insurance and may be a good trade off.
At first look it does not appear to be an attractive proposition. You promise to pay $500 more if you have an accident but you only get $200 savings. The point to remember is that you would have to pay $500 extra on deductibles “if” you have an accident. If you have no accident in the next policy term you save $200.
Who Would Benefit the Most from Increased Deductibles?
This brings us to the question of who would benefit most from increasing this trade off? Policyholders with low or no accident counts in the past should seriously consider saving money with this option. If you did not have accident in the past it is a good indication that you won’t have many in the future. That is how car insurers calculate premiums anyway. Also, where you live and how much you drive can be important factors to consider. If you live in relatively quiet part of the country with low crime and traffic and not driving excessively you may consider your chances of having a claim in the near feature to be low. This would mean that you wouldn’t have to pay deductibles and possibly keep all the premium discounts you achieved.
Who Should Think Twice before Increasing Deductibles?
If you see your chances of having claims to be high you should think twice before making changes to your policy. In the above example, your $200 savings could easily turn to $300 loss if you end up making a Collision claim and paying $1,000 out of pocket instead of the $500 usual amount. Even you have a good claim record and don’t expect to have a claim think about where you live and how much you drive. If you live in a city like Los Angeles and drive 30,000 miles a year your chances of making a claim is pretty high. That is why you should think carefully about this.
Also, your personal finances should be considered when answering the question of how much deductible is good for auto insurance? If you don’t have $1,000 to pay you should not accept or raise it. In addition, you should keep around this much money in the bank if you choose the $1,000 amount because you never know when you will need it. That is why people buy insurance in the first place as they don’t know what might happen.
Unfortunately there isn’t one simple answer to what is the best deductible for vehicle insurance? There are a few factors to be considered before reaching a final decision. In most cases, the answer depends on how much you can save by increasing them. That is why you should get quotes with lower and higher amounts and compare them.