High or Low Deductibles, the logic behind both

Is having a higher deductible on your car insurance better than a lower deductible?  Some people opt for the higher deductible to save on there monthly payments.

Then you back out of a parking lot right into a telephone poll.  When you bring your car to the auto shop for a quote, turns out your on the hook for paying for the entire bill.  Now you are thinking to yourself,  how is a good deal?

Lets compare both types of car insurance policies with both low and high deductibles.  And remember there are important factors that we need to consider, your finances, your driving record, and your premium costs.  We are here to help you!

What is a deductible?

First thing is first lets explain what your deductible is.  A car insurance deductible is the amount of money you have to pay toward repairs before your insurance covers the rest.  For example, if you’re in an accident that causes $3,000 worth of damage to your car and your deductible is $500, you will only have to pay $500 toward the repair.

So now you might be thinking, well why can’t my insurance company just pay for the entire thing?  According the Insurance Information Institute, a deductible represents “a sharing of the risk between the insurance company and the policyholder.”  So knowing this you might be a little more careful while parking your car not to bump into another car or picking up that phone to send a text while you are driving.

Compare.com explains a bit more about deductibles that make sense to the average person who doesn’t understand insurance.   “A car insurance deductible typically applies only to the parts of your policy concerning damage to your property: comprehensive and collision coverage.  Liability coverage has no deductible. So if you hit someone else at a red light, your insurance will pay the entire cost (up to your coverage limits) of repairs to the other driver’s vehicle.  Make sense?

Pros and Cons

A low deductible is most desired if actually need to file a claim since it means you will pay less money out of your own pocket toward the cost of your loss.  Of course, this benefit comes with a price tag.  Drivers tend to pay much more for there insurance premium with a low deductible than they would with a higher one.  Switching to a higher deductible affords the greatest upfront savings.  However, the cost of filing a claim could shock you on the price that you eventually have to pay.

Finances

The first thing to consider when choosing a deductible is the amount of money you can pay if you are involved in an accident. Most auto insurance companies have deductible levels you can choose, with most ranging from $0 to $1,500. The amount of your deductible directly influences the premium you pay: generally, the higher the deductible, the less your premiums are. On the other hand, if you choose a lower deductible, your premium most likely will be higher since the insurance company will be paying more money to repair your car if it is damaged.

It’s not quite as simple as choosing a higher deductible and being done with it however. A higher deductible, while lowering your premium, is not going to matter if you cannot afford to pay for damages to your car in the event of an accident. So, if you decide on a $1000 deductible you need to be prepared to pay that amount, should the time come. Only you can determine the amount you are comfortable paying.

Driving Record

If you’ve been in multiple accidents, your cost for car insurance is likely to be higher than someone with a clean driving record. If you’re a new driver and have not had insurance before, chances are you’ll pay more for car insurance.

It’s Up to You

In the end, the decision is yours. You can consult with any of our independent insurance agents for advice, but there is no way of knowing if you will need to file a claim in your future.  If you carrying such a high deductible makes your uncomfortable or you would cringe at the thought of paying so much out of pocket for a claim, you might be better off for choosing a lower deductible.  On the other hand, a higher deductible might be more appropriate if you like the idea of the large savings on premiums and the ability to add those savings to your emergency fund or travel fund.

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Are you ready to save time, aggravation, and money? The team at Farquhar & Black Insurance is here and ready to make the process as painless as possible. We look forward to meeting you!

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