Steps for Choosing Your Auto Deductible

Nate Crosby |
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car insurance

Steps for Choosing Your Auto Deductible 

Choosing the right car insurance brings with it many decisions. When you’re customizing your policy, an important choice is your deductible amount. 

What is an Auto Insurance Deductible?

The deductible is the amount you pay out of pocket before your insurance kicks in to cover a claim.

A deductible applies when you file a claim for damage to your own vehicle. It’s the amount you agree to pay first, while the insurer pays the rest, up to the policy limits. For example, if you have a $500 deductible and your repair costs are $2,000, you'll pay $500, and the insurance company will cover the remaining $1,500.

If you’re in an accident and it’s your fault, you typically pay the deductible under your policy. If another person is at fault for damage to your vehicle, their insurance will typically pay for your damage in its entirety. In this case, you are not responsible for the deductible under your own policy.

Deductibles typically only apply to collision and comprehensive coverage. (There may be other cases where you could have a deductible so ask your agent about all coverages with deductibles.)

Deductibles and Premiums

Your deductible and your insurance premium are related in that higher deductibles lead to lower premiums, while lower deductibles mean higher premiums. This is because if you raise your deductible, you're assuming more financial responsibility for any potential claims. This reduces the risk to your insurer and therefore lowers your premium. Alternatively, choosing a lower deductible offers more financial protection in the event of an accident, but increases your monthly payments.

An insurance agent can provide multiple quotes with varying deductibles. They can also explain how changing your deductible can affect your annual premium—or show you the cost savings between different options over multiple years. 

Choosing a Deductible That’s Right for You

When choosing the right auto insurance deductible, there are a few key questions to consider. 

Budget

  • If you’re in an accident, can you afford the deductible? 
  • Do you have an emergency fund? 
  • How stable is your income? 

Driving habits

  • How often do you drive?
  • What is your driving record?
  • Where do you live and park? 

Vehicle value 

  • What is the age of your vehicle?
  • Do you have a loan to pay for it? 

Lean on Your Insurance Agent

We know that coverage needs to meet your needs at any given time. It’s a good idea to reassess coverage on a routine basis to ensure it still works for you – this includes your deductible amount. Need help? Give our office a call. 
 

 

 

Disclaimer: Crosby Advisory Group, LLC provides financial planning, business growth strategies and Insurance protection. CAG is a registered investment advisor. Investing involves risk including the potential loss of principal. Consider all risks before investing.