How to Select the Right Deductible Amount

Written by Ryan Hurlbert on January 7, 2010 & Posted in Auto Insurance

When you purchase car insurance, you have many choices to make. From liability limits to extras such as roadside assistance. Another important decision is the level of your deductible.

What Are Deductibles?

When you purchase comprehensive and collision coverage, you have to choose a deductible. The deductible is the amount of any loss that you will pay. If your deductible is $250, you will pay the first $250 towards any covered repair and your insurer pays the balance. Raising your deductible can reduce your premium because you have reduced the car insurance company's exposure to loss.

So, just pick the maximum deductible the insurance company offers and get the cheapest car insurance possible, right? Perhaps, but you should think about a few factors before selecting the highest deductible.

Thinking Through Deductibles

Before setting your deductibles, here are some things you should consider:

  1. If you have a car loan, contact your lender and determine how large of a deductible they allow. You won't be able to exceed their limits without violating your insurance agreement
  2. How much can you really afford to pay to get your car repaired?
  3. Is the potential savings worth the extra risk?

Comprehensive Coverage and Your Deductible

Comprehensive, or "other than collision" coverage, pays for damage to your vehicle caused by things outside of your control. Damage from fire, flood, vandalism, flying rocks, animals, and theft are all covered by comprehensive coverage.

One of the most common comprehensive claims is for windshields cracked by rocks or debris kicked up by other cars. If you walked outside right now, and your windshield was broken, how much money could you come up with immediately to pay for the repair?

Make sure you can afford to pay your deductible so your car can be repaired and you can drive safely.

Collision Coverage and Your Deductible

Collision coverage pays for damage to your auto when you are at fault. If you are confident in your driving skills, you may be willing to gamble a little more on a higher deductible.

A higher deductible can save you some money on premium payments, but don't select a deductible than you can't afford. Body shops rarely release a car until the entire bill is paid--including your deductible. Many will charge you storage fees for each day your car is there after repairs have been completed, so you don't have much time to scrape up the cash.

Balance Risk and Reward

You can make car insurance cheaper by increasing your deductibles, but the immediate savings may not be worth the risk. One expensive windshield replacement can wipe out years of premium savings.

Everyone wants inexpensive car insurance, and we make it easy to gather quotes and compare. You can easily find the perfect balance of savings and protection.

About the Author

Ryan Hurlbert lives and works in the Pacific Northwest. As an insurance agent, he produced and presented educational seminars on various topics from insurance basics to strategies for dealing with teen drivers. He has researched and produced marketing materials in the insurance, auto, and financial industries. Ryan majored in business and received his Bachelor of Science degree from Portland State University.

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