Pros and Cons of a High Car Insurance Deductible

Pros and Cons of a High Car Insurance Deductible

Jun 01

A deductible is an out-of-the-pocket expense that a car owner must pay before their insurance provider begins paying for damages. When choosing deductibles, the question that comes to mind is “Will I opt for a higher or lower amount of deductible?” If you are looking for reduced interest rates, the former is the better option than the latter. There are many benefits to getting a higher deductible than a lower amount. Let us take a look at the benefits.

1. Lower Premiums

According to the website of Madison, WI car accident attorneys, having a higher deductible entitles you to a lower monthly interest rate on your car insurance. This is true regardless of the type of insurance you are applying for. According to the Insurance Information Institute, an increase of $200 to $500 on your insurance policy can result to a 30 percent reduction on your premiums. If you can afford to increase it by $1,000, you can get around 40 percent savings on your premium.

2. Cash on Hand for Emergency Situations

By increasing the amount of your deductible, you are assured of having cash on hand for emergency situations. Let us say something unforeseen happens with your car, you will have something to pay off for whatever expenses you will incur. Funding your deductibles can give you something to use in times of emergencies.

Tips on Choosing Amount of Deductible

Deciding on the amount of your deductible can be difficult. It will eventually affect your future finances on your car insurance. Here are some helpful reminders on selecting the right amount of deductible.

  1. Choose a deductible that you can afford. Everything boils down to how much budget you can afford to shell out. Remember that your insurance provider will not pay for damages until you have paid up your deductibles. So think long and hard on how much money you would like to risk for your deductibles.
  2. Consider how the deductible will affect the amount of insurance. When choosing the amount of deductible, think of the long term effect it will have on your insurance premium. How much will you be able to save if you pay $1,000 on deductibles compared to $500. Will you get huge savings in your insurance premium when making an additional payment for your deductible?

If you have comprehensive and collision coverage, it will be dependent on three things: the value of the car, the likelihood of a claim, and the amount of your deductible. Having a higher deductible can reduce any potential risk from your insurance company.

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