How does your car insurance deductible work?

When you begin a new car insurance policy there are many different options to choose to set your premium.  One of these options is your deductible.  For some choosing a higher deductible means a lower premium.

Now your deductible in car insurance is very different then say your deductible in health insurance.  When you meet your deductible with your health care for the year, in most policies you are no longer on the hook for any more out of pocket expenses.

With your auto policy you have to pay your deductible each time you have a claim no matter how many times a year this may happen.  For example: If you have $300 in damages and a $500 deductible, you’d pay all of the repair costs.  Also if you total your car, your insurer will give you a payment for its current value, minus your deductible.

Do you want a high or low deductible?

Most often, a lower deductible means higher monthly payments.  If you have a low deductible, you have more coverage from your insurance company and you have to pay less out of pocket in the case of a claim.  A higher deductible means a reduced cost in your insurance premium.

So which would you choose?  A $500 deductible?  Or $1,000?  A lot should go into this decision when you are sitting writing your policy with any of our account managers.  When choosing your higher deductible take a look at your “emergency funds.”  If you have a $1,000 deductible, you would then have to pay that $1,000 in the case of a claim.

Could you pay that money out of pocket in order to repair your car?  If the answer is no, you’ll want a lower deductible to ensure you are not left without in a bind to repair your car.   If you have that money on hand at any point, it might be worth opting for a higher deductible.

How often are you in accidents?

Now granted we understand that you can not predict when and where a car accident happens.  But you know what kind of driver you are.  Are you new the road?  Are you an experienced driver?

If you know that you are a cautious and well experienced driver, than a higherdeductible might be your best option.  You know that accidents are very far and few between and this will save you on your premium which could help you pay for that higher deductible when the time may arrive when you are in an accident.

So if you know that you are a bit of a bumper car driver (as your agent we hope you’re not) the lower deductible is up your ally.  This will allow you to financially be able to pay for your claim and get you back on the road sooner.

What is the cost of your vehicle?

Expensive vehicles cost more to insure.  In this case, a high deductible might make sense because you would have higher savings on your premiums.

On less valuable cars, you may not want a high deductible because the cost to repair damage might not equal to your deductible.  For example, if you have a $1,000 deductible and your used car needs a total repair of only $600, you would pay that entire amount out of pocket.  Your insurance wouldn’t pay for anything.

Additionally, a lower value car will have a lower cost of insurance. In this way, the price difference between a $500 deductible and $1,000 deductible wouldn’t give you bigger premium savings.

The bottom line is this, if you can’t afford your premium today don’t raise your deductible tomorrow.  There are many ways for you to be able to save on your policy.  You can bundle your home and policies together, or your best option to call us and let us help you.  You can visit us online 24 hours a day or calling us at 781.599.2200 Monday – Friday from 9-5.




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