Insurance deductibles can be a bit tricky. Knowing what you should select can be dependant on your current financial situation and even the type of vehicle you drive. For instance, you may want to select a higher deductible if you prefer lower insurance premiums each month, or a lower deductible if you don’t have enough money set aside for emergencies. Understanding how it meshes in with your car insurance is confusing so Answer Financial has broken it down for you. Check out their video below for more information, but hey, we also included the transcript as well if you fancy that.
Michael: Figuring out the correct deductible amount for you should not be a mystery. Hi, I’m Michael with Answer financial and today we’re going to discuss a few simple ways to determine the deductible that fits your personal situation. For those who aren’t familiar with the term deductible, this is the amount the insurance company deducts from the damage cost because you are responsible for paying it. In essence, it is the amount of risk you’re willing to accept. Deductibles normally range from $250 to $1,500 per accident depending on your state insurance regulations and what level of coverage you choose.
Having a lower deductible like $250 will mean your insurance premium will be higher. Conversely, having a high deductible like $1500 will translate to having a lower premium. If you are financing your car, the finance company will specify your minimum insurance and deductibles. Here’s an example of how it works. If you’ve taken a $500 deductible and there’s an accident, you are responsible for paying up the $500 out of your own pocket. The insurance company will then pay any additional cost to repair your vehicle. If the damage is $500 or less, you pick up the full tab.
Why would you choose a low deductible? Lower deductibles make more sense when you don’t have a lot of money set aside in an emergency fund, have had several accidents whether or not you were at fault, live in a city or a place where accidents and natural disasters are fairly common. When would you choose a higher deductible? Higher deductibles can make more sense when you want to save money on your monthly premiums, have very few or no accidents, have enough money set aside to be comfortable assuming a higher out-of-pocket risk in case you are in an accident. Remember, the monthly amount you save on your premiums by raising the deductible may not be enough to justify the risk.
Find out what the difference in premium would be and compare it to the cost to come up with the deductible in case of an accident. If you need to pay more out-of-pocket to repair your car, you may lose any savings you would see from a higher deductible. Talk to one of our insurance experts to help you decide on the right deductibles for you and your car. Answer financial is one of the largest auto and home insurance agencies in the US with over 2.8 million vehicles and homes insured. There is a lot more useful info available on our website at answerfinancial.com or call us at 1-866-635-7777.