Auto insurance is required of car owners in most states. And anyone with an outstanding loan on a vehicle will be required by their lienholder to purchase full-coverage auto insurance, including collision, comprehensive, and liability. But the good news is that car owners are given the choice not only of a multitude of competing insurers, but also the choice of deductible in which to save money on insurance costs.
A Closer Look at the Deductible
A deductible is an amount that the insurance purchaser agrees to pay out of pocket if a claim should ever arise for car repairs. Different deductible amounts can be chosen for both collision and comprehensive, and the higher the deductible, the more one can save on monthly premium costs.
However, the temptation exists to choose an excessive deductible amount just for the sake of saving those few dollars each month. If a car owner has chosen a high deductible and suffers damage due to an accident or other causes, then those few saved dollars could translate into big bucks when it comes time to pay for the repairs. In many cases, a car owner becomes strapped financially just to get a car out of hock from a repair shop.
Choosing an Appropriate Deductible
The question for most car owners is how to chose the right deductible amount that is both affordable if ever repairs are necessary, and saves money on insurance costs. The car itself can be a big factor. If the vehicle is newer and a more expensive model, repairs are most likely going to be costly. Are you prepared to pay $1,000, or even $5,000, out of pocket for those costs?
On the other hand, an older vehicle with lower book value may not even be worth insuring for a high collision amount. Repair costs may equal or exceed the actual value of the vehicle. A lower deductible that would help pay for fender-bender repairs would make more sense in this case.
The deductible choice is always a tough one when it comes to saving money on insurance. Ultimately, car owners must be prepared to pay in one form or the other to protect against large repair costs, or pay a greater portion of repairs themselves.
