What are you looking for when you’re out shopping auto insurance quotes? If you’re like some, you’re hunting for low deductibles in an effort to minimize the threshold before your plan starts paying out, but did you know that there are some instances where you might want to bump that deductible up a bit? Today, we’re going to explore some of the reasons you might consider increasing your auto insurance deductible, along with how it might impact your pocketbook.
First, let’s make sure we’re on the same page when we’re talking about what a deductible is. Long story short, it’s what you pay out-of-pocket before your insurance plan covers the damages associated with your claim. You pay this every time you file a claim, which is a contrast to some other forms of insurance (like health insurance) where you may have an annual deductible to meet before insurance steps in to cover costs.
For example’s sake, let’s say you’re in a collision which causes $6,000 worth of damage to your vehicle, and a $500 deductible on your plan. In this case, you would be responsible for the first $500 of the claim, and the insurance company would take care of the remaining $5,500.
Since liability coverage is a type of insurance that’s required by most states (to help cover injuries and property damage to other parties when you’re in an accident), it often requires no deductible. Other auto insurance types, however, like collision, comprehensive, and uninsured/underinsured motorist coverage, are usually optional and have a deductible.
A lower deductible means you’ll pay a higher car insurance rate (greater monthly premiums), but it also means there are fewer out-of-pocket costs for you to cover in case of an accident (which is why many people have insurance). So, why would you want to go with a higher deductible auto plan instead? Because done right, it might save you some money.
If you have a higher deductible, you’ll pay higher out-of-pocket costs, but that’s only if you’re in an accident. If you manage to drive about without needing to make a claim, then you’ll be able to enjoy the lower monthly rates that come with a high-deductible plan.
So, if you have the money tucked away to cover the costs that will result from a claim and you want to save a bit on your premiums, increasing your deductible might be the right move. Before you make that move, however, be sure you’ve considered some of the variables.
Ask yourself, “are the monthly savings worth it?” Is it worth, for instance, saving a few hundred dollars over the course of a year, if the deductible you’ll end up paying in the event of an accident is $1,000? $1,500? Even if you’re a careful driver, there’s no guarantee that something unexpected won’t happen, and in those cases, having insurance to help out with the high costs of vehicle collisions and other mishaps. Do the math, and see if it’s really worth the risk.