By Emily Delbridge. Car Insurance and Loans Expert
Emily Sue Delbridge has a strong family history in the insurance industry. She has been in the insurance business since 2005 with her primary focus on personal lines insurance. Read more
Picking your auto insurance deductible is a highly personal decision. It depends on your personal comfort level and the amount of risk you are willing to take. It is really up to you to weigh your choices and determine the best option for you and your family. An insurance agent can give you some of the information you need to make an educated decision, but do not let your agent decide for you.
Six questions to get the answers to when it comes to choosing auto insurance deductibles.
1. What does your emergency fund look like?
2. What is the value of your vehicle?
The value of your vehicle makes a big difference in what deductible makes sense. The more expensive your vehicle, often the more it costs to insure. A high deductible makes sense on a high value vehicle because the savings can be significant.
If you are one of those people who can’t see going without physical damage coverage on your aging vehicle it may no longer make sense to carry a high deductible. For example, if your 10 year old vehicle still has comprehensive coverage. you probably don’t want to carry a $1000 deductible because the value of the vehicle is likely within a couple thousand dollars of the deductible. Plus, the savings of a $1000 deductible verse a $500 deductible on comprehensive may only be a few dollars every month. Same goes for $500 verse $100 deductible for comprehensive on an older vehicle, the price may not vary much.
3. What are the various costs for different deductibles?
Check with your insurance agent or
online to see what different deductibles cost. If it will take more than three years to recoup your money, you are probably better off going with the lower deductible.
To calculate your savings quote your collision deductible at both $500 and $1000. Determine the savings and calculate how long it will take the savings to add up to the $500 difference. If you can save $500 in premium in three years, it might be a good option to go with the higher deductible. Nobody knows if you will actually have a claim in the three year period. The savings could be money in your pocket or you might spend the next three years recouping your money.
4. What is your risk?
5. Is a vanishing deductible a good option?
Vanishing deductibles are becoming a popular option, but whether it is a good option varies with who you ask. Basically if paying a deductible would cripple you financially the vanishing deductible could be helpful. You do pay extra insurance premium to get the reduction in deductible. You would be better off saving money in your emergency fund. If you constantly struggle with saving an emergency fund, a vanishing deductible is a viable option. More »
6. Does it make sense to choose a different deductible for different coverage?
To keep things simple, it is recommended to keep the same deductibles on all your vehicles. It is ok to opt for different coverage, but if you have two vehicles with full coverage go with the same deductibles on both. It can be very confusing and frustrating if you select different deductibles per vehicle. Know what your deductibles are and be prepared to pay up when you go to repair your vehicle after a loss. Hopefully knowing the answers to these questions will help you select the right deductible for your situation.