When it comes to your car insurance, one of the elements that you control is how much your deductible is. With your car insurance, you set the deductible rate for your collision and your comprehension coverage. You only have to pay your deductible if you get into an accident or if your car gets damaged.
Car insurance deductibles typically range from a hundred dollars to a thousand dollars. The lower you go with your deductible, the higher your premium goes. However, choosing the right amount for your deductible is about more than lowering your premium; it is about finding the right balance for your family.
The Value of Your Vehicle
First, you need to understand the overall value of your vehicle. If your vehicle is old and is worth less than two thousand dollars, it may not even be worth it for you to be carrying collision and comprehensive insurance on your vehicle. If your vehicle is worth under two thousand dollars, it doesn't make sense to pay for collision and comprehensive insurance, and it sure doesn't make sense to pay a large deductible to fix up your car. Put that money you save on insurance into a savings fund for a new vehicle.
If, on the other hand, your vehicle is worth twenty thousand dollars, it is totally worth it to carry collision and comprehensive insurance, as well as a deductible you can afford.
The Size of Your Emergency Fund
The idea behind a deductible is that if you got into an accident tomorrow, you would be able to pay the cost of your deductible without having to dip into your regular funds. You should have enough money in your emergency fund to pay the deductible in full.
For example, if your emergency fund only has three hundred dollars in it, it doesn't make sense to have a five-hundred-dollar deductible that you couldn't pay anyway. Your deducible should not exceed the amount in your emergency fund.
Your Ability to Handle the Unexpected
Finally, you need to judge your ability to handle the unexpected. If you don't have an emergency fund, can you take out a personal loan? How much do you qualify for? If you have a credit card, how much credit do you keep available on it at all times? You need to judge your ability to handle the unexpected, such as paying a deductible following an accident.
When determining if your car insurance deductible should be a hundred dollars, five hundred dollars, a thousand dollars, or whatever amount, you need to consider your ability to pay that deductible. Choose an amount that reflects your emergency fund and ability to handle financially unexpected situations. Also, consider the value of your vehicle and if it is worth it to carry collision and comprehensive coverage.
To learn more about auto insurance, contact an insurance agent in your area.