If you are not familiar with the term “auto insurance deductible”, don’t worry because you are not alone.
In fact, many people purchase auto insurance policies without paying attention to their deductibles.
An auto insurance deductible is the amount of money you formally agree to pay towards repairs before your car insurance covers the rest.
Deductible rates depend on your policy and vary from state to state. How much financial risk are you willing to take in the event of an accident? This is just one variable in the equation.
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The amount of your deductible relates to the amount of financial risk you plan to set up for your policy, the value of your car, and the risk of you filing a claim.
How does an auto insurance deductible work?
Let’s say you are involved in a car accident that causes $4,000 worth of damage to your vehicle and your agreed deductible is $800. Then you will only have to pay $800 towards your pay.
Note that comprehensive and collision are the two most common coverages that include deductibles.
Collision coverage is the type of protection that helps drivers pay to repair or replace their vehicle in an accident with another vehicle or object.
Comprehensive coverage is a policy that covers certain damages to your vehicle that are not caused by a collision with another car, say weather damage, animal-related accidents, earthquakes, or stolen vehicles.
How much can you pay for your deductible?
Can you afford your deductible? That’s the first question you need to ask before agreeing to any deductible rate.
Many insurers work with a deductible that ranges between $0 to $1,500. It all depends on your car insurance company and their policies.
When it comes to auto insurance the higher your deductible rate, the less your premiums are.
Agreeing to a higher deductible rate also means you are not perceived as a risky driver compared to other drivers with lower deductibles.
It’s up to you how much you can afford to pay for your deductible.
What’s the value of your vehicle?
Apart from the financial aspects and risks involved in your policy, the value of your vehicle has also an impact on your auto insurance policy.
Simply, the higher the value of your vehicle, the more you’ll pay to insure it.
If you are driving an old car (9 years or older), it would make little sense to pay a high deductible rate for your car in the event of an accident. Try to make a balance on your costs.
Have you considered any risk factors?
Do you commute during rush times? Are you normally driving along busy roads, intersections, and/or areas where there’s a greater risk of getting involved in a car accident? Do you have a teen driver on your policy?
All these questions could tell us a lot about our chances of getting involved in an accident and filing a claim.
If that’s your case you may consider getting a policy with a lower deductible rate. Note that some car insurance companies require clients to choose a rate over a certain amount if they consider you to be a high risk driver.
What’s the secret of choosing an auto insurance deductible rate?
The secret of choosing your auto insurance deductible is to determine what’s the right amount of coverage for your situation, while being able to afford your auto insurance policy.
To find the auto insurance deductible rate that best fits your budget and needs, know how risky you are as a driver and how much you can afford to pay for it.
Whatever your choice is, make sure you can afford to pay for your deductible rates without compromising your coverage.