To determine the right deductible when purchasing auto insurance can be difficult. It’s tempting to reduce your rate by increasing the deductible to the maximum possible, but self insuring (which is what you would be doing) is taking on more risk than you are able to afford can place your entire financial future at risk.
Ask yourself the following questions to determine the right level of coverage for your financial comfort zone:
1. Do You Have a Healthy Savings Account? Before choosing a high deductible, be sure to set aside enough money to cover the full cost of the deductible in case of an accident. Many people find it helpful to start slow, gradually increase the deductible, and put the money in the bank. Once enough money has accumulated, then it’s safe to increase the deductible once again. The reduced premium sometimes (do the math) pays for itself within the first year.
2. Are There High-Risk Drivers in the Household? A healthy savings account can go empty fast if used frequently enough, so households with a high-risk driver may prefer a lower deductible in case of multiple accidents. Think about the statistics on young drivers or sometimes the elderly.
3. Do You Drive an Older Car? Remember, the purpose of auto insurance is to pay for repairs so you don’t have to, but people who drive older automobiles may not be as concerned about small dings or dents. In fact, some repairs may cost more than the entire depreciated value of the vehicle. It’s often more affordable to opt for higher deductibles and then use refurbished parts when obtaining repair quotes. Keep in mind that most insurers will TOTAL the vehicle if the repair is more than 75% of the depreciated value...
as an example... a car that is worth $6000 has an accident or even hail damage the will cost $5000 to repair, than that vehicle will be a candidate for being totaled and and the value may not justify a lower deductible.
Its all about the math... call your agent, do the math and make the decision.