car driving on a roadBuying a new auto insurance policy means you get to make some key decisions. You’ll need to choose the type of coverage you need and the amount right for your vehicle. In addition, you need to choose a deductible that fits your budget. Several key factors can help you determine what amount is right for your needs. Here’s how to choose a deductible.

Know When a Deductible Kicks In

First, remember that a car insurance deductible is the amount you pay for repairs after filing a claim. If you have an accident covered by your insurance that costs $1,500 to repair, and you have a $500 deductible, you’ll pay $500, and the insurer will pay $1,000. Each policy’s deductible can range significantly, based on what you choose. Here are a few things to consider.

Higher Means Less Premium Cost

The benefit of a high deductible is that the cost of your auto insurance policy usually drops. This is the premium. When you have a high deductible, the insurance company is less likely to have to pay out a significant amount of money for a claim. That means they can lower your premium costs.

Too High Means You Could Struggle Later

Let’s say you want a lower premium, so you raise your deductible to $2,000. If that same accident were to occur, with $1,500 worth of damage, you would have to pay for all of the damage out of your pocket. A $2,000 deductible means your policy will only pay if you have more than $2,000 in damage. If you could not afford to do that, you may be unable to make repairs to your car.

Finding the Balance

The goal, then, is to find some type of balance between too high and too expensive. Here are a few tips:

• Never choose a deductible that is higher than the amount of money you have in your emergency savings account. That way, you don’t have to worry about running out later.

• Ask your insurer to give you a few quotes at different deductible levels. This can help you to see what’s better for you based on how much of a premium savings it can offer.

• Don’t be afraid to make changes later. Your auto insurance agent can help you adjust your deductible if you need to later.

The right auto insurance deductible is one that is affordable to you. Work with your car insurance agent to find the right level for your new policy.

Posted 2:52 PM

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