Car insurance coverage is more important than most drivers realize. It is a state-mandated necessity when owning a vehicle, and choosing a car insurance plan should be a well-researched decision. One of the largest misconceptions and perhaps underestimated decisions when shopping around for auto insurance is the car insurance deductible.
A car insurance deductible is the amount you pay out-of-pocket when your vehicle has been damaged in some fashion. Whether the vehicle was damaged in a collision, involved in theft or damaged by an external object (i.e., tree, animal, etc.), your car insurance deductible must be satisfied before your car insurance coverage kicks in. Deductibles usually range from $250 to $1,500. The amount of your monthly premium is determined by many factors, including your deductible; the higher the deductible, the lower your insurance premium will be.
So, I should choose a higher deductible so my monthly payment will be lower, right? Wrong. Choosing a deductible should be approached pragmatically and responsibly. Do not choose a deductible you cannot financially afford. Yes, it may seem appealing to have a lower monthly premium, but if your vehicle is involved in a collision or damaged in any way, you have to be able to afford the out-of-pocket deductible before your vehicle can be fixed or replaced. If you can't afford $25 or $30 extra a month to have a $250 or $500 deductible, how will you afford to pay a $1,500 deductible? If you have a savings account set aside for your deductible that houses $1,500 or more at any given time, then choosing a higher deductible may be right for you. But if you don't have a savings account designated for emergencies such as an auto accident, it isn't prudent for you to choose a high-deductible plan, as it is easier to pay a $250 deductible when the time comes, than it is to generate $1,500. Don't be deceived by the lower monthly premium. It is the same trick that car salesmen use when they ask, "What do you want your monthly payment to be?" It is a decoy question to make consumers pay attention to their monthly payment rather than the entire cost of the vehicle. The same logic applies to car insurance deductibles and premiums. Your main focus should not be on the monthly payment, it should be on the details of the coverage itself, including the deductible.
When shopping around for car insurance coverage, make sure you choose prudently and carefully. Assess your budget before getting quotes from insurance companies and know how much you can afford on a monthly basis and what a feasible car insurance deductible is for you.
