Choosing Your Auto Insurance Deductible

By Ben Glass, Esquire

Benjamin W. Glass and Associates

. https://www.benglasslaw.com/

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Choosing Your Auto Insurance Deductible

Choosing a car insurance deductible can be a tricky situation. Most consumers don't think a great deal about why they are choosing a specific deductible or what it entails on the backend. Read below to learn a few things to consider when choosing a deductible.

Before discussing the factors at play for your deductible, let's briefly explore what a car insurance deductible is. A deductible is simply the amount of money that you must pay out of pocket before your insurance policy “kicks in” and begins to pay for additional expenses up to the applicable coverage limit. For example, let's say you backed into a large rock, scraping the paint on your bumper and causing $876 of damage.

Let's also say you have a $500 deductible. That means you are going to pay for the first $500 of expenses out of your pocket and the insurance will cover the remaining $376. If you had a $1,000 deductible, then you would have to pay the full $876 out of pocket. It's not rocket science, but it's worth spending a moment or two thinking about.

Obviously, lower deductibles will save you from more out-of-pocket expenses, but they come with a distinct downside. Lower deductibles are more expensive to carry on your insurance. That is because most of the risk of damage to your car is being passed on to your insurer. A $250 deductible effectively means anytime you damage your car, your insurer could be responsible to pay for it. As you may infer, higher deductibles, like $1,000, mean you're on the hook for more when an accident happens, but your insurance premiums will be lower for that coverage.

So, which deductible should you choose?

The answer to this question always relates to your tolerance for risk and the amount of money you have set aside in the event of an accident. If you actually set aside $1,000 for the moment that an accident happens, then carrying the higher deductible may be worth it. Of course, this means that if you repeatedly get into small accidents which result in less than $1,000 damage, you're going to feel quite unhappy.

This is why the vast majority of policies are in the range of a $500 deductible. Generally, the rates are decent and the amount that will come out of your pocket feels quite tolerable in the moment. With that said, there are many people with habits that will find a $250 or $1,000 deductible more suitable.

Give it some thought and determine how much you are actually willing to pay when an accident occurs and choose your deductible accordingly.