Deductibles and their impact on auto insurance rates


If this is your first time getting auto insurance, you may be wondering what a deductible is and if you need it and if it will affect your auto insurance cost if you do have it. Or it may be possible that you are just looking to change your auto insurance and are looking for some advice on what deductibles to get. Here is some information for you to consider.

A deductible is the amount you will pay yourself in the event of an accident. Basically, of you get into an accident, this is the amount you agree to pay, so that the insurance company isn’t footing the entire bill.

Whether or not you will need to purchase a deductible will depend on your auto insurance coverage’s policy. If you are not required to have a deductible, you may consider not getting one so that in the event of an accident, you won’t have to pay any of the costs yourself. Be advised though, that a deductible can actually reduce your rate cost (depending on the amount of the deductible) so in the long run it may be a better idea to actually have a deductible in your coverage.

If you have a comprehensive or collision policy, you probably have a predetermined amount that you yourself will have to pay in the event that you file a claim. For example, if you get into an accident and the total costs are $5,000 and the deductible is $1,500, the insurance company will pay you $3,500 in compensation, but the rest you will have to pay for yourself. So if you get a choice in the amount of your deductible, choose something you can afford, while keeping in mind that the higher your deductible is, the lower your rate premiums will be.

If you are driving an older vehicle or a second hand vehicle, keep in mind that in may be best just to opt for the minimum coverage required by law. Why? Well your older vehicle may not actually be worth as much as your deductible and it may cost the insurance company more to repair such a vehicle then to just write you a check for the cost of the vehicle. Even a high priced item such as a vehicle does have an end of life, so keep this in mind when insuring an older vehicle.

On the flip side, if you are driving a very expensive vehicle, get all the coverage you can. You want to make sure that if you get into an accident you will be totally covered and won’t end up vehicle-less and several thousands of dollars into debt. Make sure you get complete comprehensive coverage for your vehicle, and chances are if you are driving a highly expensive vehicle you can afford the higher cost of insurance anyways, so play it on the safe side.

So really, in the end, the amount of deductible you choose is based on many factors. What type of vehicle you drive (it’s worth), how old it is (sometimes parts are just not available if they need to be replaced after an accident, and the insurance company may just write off the vehicle all together), the amount you can afford in the event of an accident, and if you want to save money in the long run by having a lower rate because of a high deductible.