Should you choose a high or low auto insurance deductible? Before you select a policy, take a look at the following questions to ask about deductibles.
What Is an Insurance Deductible?
Whether this is your first car insurance policy or you're new to the industry's lingo, you need to understand what a deductible is before you can choose one. The deductible is the amount of out-of-pocket expenses you will need to pay. After you satisfy the deductible, the insurance will take over. The specific amount the insurance pays after the deductible is met depends on the policy.
Will You Need to Pay for Repairs With a Deductible?
Imagine you get in an auto accident and your car is damaged. Will you need to pay the full deductible? The answer to this question depends on your deductible and the repair costs. If you have a $1,500 deductible and the repairs total $1,000, you'll pay the full cost out of pocket. But if you have a $1,000 deductible and the repairs cost $1,500, you'll only need to pay the first $1,000. The insurance will pay the remaining $500.
Are Deductibles Annual or Per Claim?
Unlike your health insurance policy, your auto deductible isn't an annual amount. You'll pay the full deductible for every claim. This means that if you have two accidents in one year, you'll pay a deductible for each repair.
Which Deductible Should You Choose?
There are risks and benefits to both high and low deductibles. A high deductible policy typically comes with a lower premium. If you aren't in an accident and don't need to use your insurance, this can save you money over time. But if you are in an accident, you'll pay more for the cost of repairs with a high-deductible option.
Low deductibles often come with higher premiums. Even though you may pay more per month, you could save money on repair costs—especially if your car requires expensive repairs or you get into more than one accident in a year.
Can You Change Your Deductible?
Do you want to save money monthly on a lower-premium-higher-deductible policy? If you're willing to take the risk of higher out-of-pocket expenses in the event of an accident, you can raise the deductible amount. Talk to your insurance agent before you change the deductible on an existing policy. The agent may find other ways to save you money that won't involve a deductible change. Contact a local auto insurance agency to learn more.