Understanding Insurance Policies

Posted on: 19 February 2020

When you shop for a car insurance policy, one of the decisions you have to make is how high you want your deductible to be. Your deductible is how much you'll have to pay before your car insurance coverage takes over, so it's important to consider several factors before you choose a deductible amount.

Look at Your Finances

One of the first things you should consider when you decide on a deductible amount is your current financial situation. While a higher deductible usually means you'll spend less money on your premiums, the savings aren't likely to make much difference if you can't get your vehicle fixed because you can't afford to pay the deductible. 

Try to choose a deductible you'll be able to pay with your savings or a separate emergency fund, even if that means paying a bit more for your premium. 

Consider Your Vehicle's Value

Determine the value of your vehicle before you settle on an insurance policy. If you have a newer or high-value vehicle that costs more to insure, you may want to opt for an insurance policy with a higher deductible so that your premiums are more affordable.

If you're insuring an older vehicle that isn't worth much, a lower deductible might be in your best interest. If you choose a high deductible for a low-value vehicle, the value of the vehicle might not be much more than the deductible amount, which means you'll have to pay for most repair expenses yourself.

Assess Your Risk

Figure out how much of a risk your driving habits pose to help you decide on a deductible amount. If you frequently drive in busy areas during rush hour or other times of high traffic volume, you're more likely to be involved in an accident than someone who only drives a couple of times a week on clear, rural roads, so a lower deductible might be a wise choice. 

Drivers who don't take their vehicles out daily and drive in safer areas might want to choose a higher deductible because there is less chance they'll need to make an insurance claim due to an accident.

Calculate Your Savings

Once you have a general idea of how much deductible you can comfortably afford, add up the savings of going with a higher deductible. In general, if the difference between two deductible levels is less than what you will save in three years of premium payments, it might make good financial sense to opt for the higher deductible as long as you can afford it if something happens.

If you're still not sure how high of a deductible you're comfortable with, contact an auto insurance agent at a company like LA Insurance for help customizing a policy for your needs.