How To Determine Your Deductible
Deciding what your deductible should be is crucial in determining what your car insurance rates are going to be. How much can you afford, how often do you file claims, and how big are the claims you file are all important factors in deciding whether you should get a $250, $500, or $1,000 deductible. To help you determine the proper deductible for your situation, let’s discuss multiple scenarios and how it would affect your car insurance rates.
A Bad Driving Record vs. Clean One
In cases like this, let’s assume you’ve gotten a couple tickets and were involved in an at-fault car accident, and won’t have a clean driving record for years to come. Because your poor driving record makes you a high risk to the auto insurance company, you’re already going to face high car insurance rates. However, because your car insurance rates are so high, you are probably less likely to actually file small claims to avoid increasing your rates even more, or worse, get dropped by your car insurance company.
Since this driver is unlikely to file a small claim, logically, he/she should carry a higher deductible. A higher deductible can significantly reduce your auto insurance rates by 20 to 30 percent, and the money you save over a few years could pay for the deductible difference if you were to pay out of pocket for a claim.
On A Budget and Need Cheap Rates
This is a tricky situation and one that requires a close look at your personal finances. After paying your bills, rent, car payments, loans, groceries, etc, there isn’t much left to save. If you were to get into a car accident, you might not be able to afford a high $1,000 deductible to pay for repairs or damages. Obviously you need your car to get to work, and in this case, it would make sense to pay a premium for car insurance with a low deductible that will make sure you get the protection you need.
However, on the flip side, you’re on a budget, but do have a couple thousand dollars stashed away for an emergency and are generally a very safe driver or one who does not drive much at all. This lowers your risk of being in a car accident, so it may make sense to have a high deductible, $500 or $1,000, that will keep your car insurance quotes low and help you save money over time.
Driving An Expensive, Luxury Car or An Old Vehicle
For drivers with an expensive, luxury car, you may have the discretionary income to willingly file small claims to maintain the value of your vehicle and/or make sure it stays in mint condition. Most people who can afford a nice car are not going to mind the additional premium on their car insurance rates that come with a lower deductible. After all, you’re going to want to get every scratch, broken taillight, mirror, window, etc fixed, especially if it depreciates the value of your vehicle.
On the other hand, if you have an old car that is already in bad condition, a driver doesn’t need to spend too much on car insurance because it’s a waste. By paying a high premium to insure a car that is worth little (less than $3,000), you essentially will end up paying more in premiums than the car is even worth, especially with a low auto insurance deductible. In this particular situation, the driver should probably carry a $500 or $1,000 deductible, avoid small claims that may impact your car insurance rates, and just save as much as possible with minimum coverage.
Deductibles Affect Car Insurance Quotes
Maybe none of the above situations directly apply to you, or a combination do. Either way, the examples provided give drivers insight into how auto insurance companies think and analyze risk. In the end, the bottom line is, what are the chances you will file a claim?
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