Tips For Choosing The Right Deductible For Your Auto Insurance
If you choose comprehensive and collision coverage for your auto insurance policy, you will have a deductible. The deductible amount can be different for these coverage types, and you get to choose it. How do you choose the right amount, though? What are your options? If you are new to auto insurance and do not know how to determine this amount, here are some tips to help you.
Understand How It Works
First, you must know what a deductible is and how it works. Your deductible amount only matters if you file a claim with your insurance company. If someone collides with you and causes the accident, you will file a claim with the other person's insurance company. If you cause the accident, you file the claim with yours. When you file a claim, your deductible kicks in, which means you must pay the amount before your insurance provider compensates you for the remaining damages. If your deductible is $1,000, you pay the first $1,000. If it is $500, you pay $500. Therefore, the deductible matters only when you file a claim for damages.
The Benefits of a Low Deductible
A low deductible is usually around $200 to $500. Having a low amount like this is beneficial when you file a claim. Imagine if you have $5,000 in damages to your vehicle when filing a claim. With a $200 deductible, you pay only $200, while your insurance company pays $4,800. Therefore, the benefit of a low deductible is that you pay less money whenever you file a claim. Paying less is great if you live on a fixed income and do not have a lot of money in your savings account.
The Benefits of a High Deductible
If you choose a higher deductible, you might choose $1,000 or more. While you would have to pay more money if you file a claim, having a high deductible provides lower premiums. Your insurance company will charge less for your policy when you choose a higher deductible. They do this because they pay less if you file a claim, so your insurance company has lower risks with insuring you. When they have lower risks, they charge lower rates.
Now that you understand these things about insurance deductibles, you can decide what amount is right for you. If you need to purchase a new policy or update yours, contact an auto insurance agent today.