Buying car insurance can be a frustrating process.
Many people do it online without the help of an insurance agent.
How do you know what coverage to select, though, to get the lowest car insurance premium?
And how do you know what auto insurance deductible amount to choose?
The range of deductible amounts can be huge!
You will learn about car insurance deductibles, what impacts them, and how to choose the best one for your budget.
What is an Auto Insurance Deductible?
A deductible is an amount you are responsible for before your insurance company will pay for any damages or claims against your car insurance policy. An auto insurance deductible is similar to a health insurance deductible.
Every insurance company is different, but typically you get to choose the deductible that is most appropriate for your budget while providing the right level of insurance coverage for your situation. This drastically affects your car insurance premiums.
Some car insurance companies let you qualify for deductibles as low as $0, depending on your driving and payment history. Most people have deductibles that range from $250 to $1,000 and their desired car insurance coverage.
If your auto claim is lower than the deductible, you’ll just pay that lower amount out of pocket. If the amount is higher than the deductible, you’ll pay the deductible and the insurance company will pay the remaining covered cost.
3 Things That Your Auto Insurance Deductible Amount Impacts
Aside from your own personal choice, there are things that your auto insurance deductible impacts. Each of these components will vary from person to person and the types of insurance you choose, so keep these in mind when choosing an auto deductible:
In most cases, the higher your car insurance deductible, the lower your car insurance premiums. Your premiums, along with your deductible, help cover the cost of any damages you have in a car accident.
If you want a lower policy premium, choose a higher deductible – but make sure you have plenty of savings to cover the auto deductible in case there is an accident. You don’t want to be scrambling for cash after having a car accident and you go to file a claim.
2. Out-of-Pocket Costs
Your auto deductible – and coverage limits – will determine your out-of-pocket costs. Depending on how you choose to think about it, your deductible is an out-of-pocket cost. It’s just one that you should plan for, so you aren’t caught off guard financially.
Your coverage limits will determine how much you owe in a serious accident. You will owe anything that exceeds your coverage limits, so choose those limits wisely.
3. Financing Partner
If you own your car, you are usually only responsible for certain liability insurances. If you are financing your car through a financial institution, however, your insurance company may require higher coverage limits in general.
In addition to higher coverage limits, they may also require you to have a lower deductible. For example, some financing companies require you to have a deductible under \$500. That means you don’t have much of a choice and will likely have to deal with higher premiums.
4. Other Driver in an Accident
This is something to think about: if you have an accident and you are the responsible party, will you be able to afford to cover the other driver’s medical expenses and property damage claims?
It’s a difficult thing to think about, but your deductible choice and being able to pay it greatly impacts their ability to receive timely payment. If you know paying a higher deductible is going to be hard, choose a lower deductible and work those higher premiums into a monthly payment.
Choosing a Florida Auto Insurance Deductible
Choosing a deductible is a serious financial decision that you shouldn’t take likely – not for the sake of your own vehicle, but for the sake of damaging someone else’s property.
Think about the average cost of the vehicles in the area you live and how much you would have to pay if you were in an accident where you lived.
Here are some things you need to think about when choosing a Florida auto insurance deductible:
- Your personal savings plan. If you are in an accident, you need to know how much you can afford to pay out-of-pocket for any property damages and medical claims made against your policy. If you have lower coverage limits, you’ll need to have higher savings.
- How much you can save over time. Compare the cost of the highest deductible you can afford to pay (how much to pay all at one time) and the lowest deductible you can afford to pay (how much you can afford to pay each month) and then see what your savings over time is.
- Your driving habits. Have you ever been in an accident? Do you have a clean driving record? Your driving habits are a good indicator of what kind of deductible to choose – if you’ve had an accident before, you know how much you paid out-of-pocket. Choose a deductible you know you can stomach.
- Choosing different deductibles for different coverages. You can choose a different auto deductible for comprehensive or collision insurance. It may be worth it to compare what you would save by having different deductibles for those policies.
Choosing the Best Auto Insurance Deductible for Your Budget
The best information is for last: choosing the best auto insurance deductible for your budget. Here’s the thing, though: there’s only so much advice to give on this topic before it comes down to a personal decision.
Think about some scenarios and how they will impact you financially. For example, if you choose a $1,000 deductible and you are in a serious accident, will you be able to 1) come up with $1,000, and 2) come up with any out-of-pocket costs for the medical expenses of you or another party?
Choose the deductible that will fit your budget in the tightest financial situation you’ve been in, and then make monthly premium payments to break up that cost a little bit.