What Kind of Deductibles Do You Want for Car Insurance?
If you want to purchase comprehensive or collision insurance for your vehicle, you'll have to choose a deductible. Your deductible is the amount you'll pay out-of-pocket for a covered insurance loss or damages. The amount you choose affects the cost of your insurance policy, as a higher deductible reduces your insurance company's risk.
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Your Lender or Lessor's Requirements
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Your deductible options might be limited if you're leasing or financing your car. Most banks require specific minimums for full-coverage insurance policies during your contract term. Read your contract over or call your lender to determine your deductible requirements. You may choose a lower deductible than your bank allows, but not more. Lenders commonly require a deductible of $500 or less. If you don't abide by your contract, your lender can repossess your vehicle or add an expensive insurance policy to your loan that protects the vehicle and increases your monthly payment.
Options and Cost
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Insurance companies may differ on the deductibles offered, but many offer options from zero dollars to at least $1,000 with $250 increments in between. Some lenders or leasing companies allow up a $1,000 deductible. Discuss your deductible options and premium cost with your insurance provider. Find out how each option affects your monthly payment or entire premium cost if you plan to pay your premium in one payment. This way, you'll have accurate information for your comparisons.
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Budget and Savings
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Determine which monthly payment you can afford or if you can afford the entire premium cost. You should choose a deductible that you can easily pay if necessary, while still keeping your premium cost or payment affordable. If you have money saved that you can put toward a deductible on short notice, then choose a higher deductible. Consider shopping other insurance companies to compare payments. You might be able to choose a higher deductible with a lower premium cost from another insurance company.
Warning
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Choosing a high deductible might seem worthwhile because of the cost of your premium, but keep in mind that you might need to pay your deductible when you least expect to. If your vehicle needs repairs, a repair shop provides your insurance company with an estimate. The insurance company subtracts your deductible from the estimate, leaving you to pay the rest of the bill. If you can't work out a payment plan with a body shop, you might pay storage fees or find you have to borrow your deductible amount.
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