What Are The Best Ways To Determine Auto Insurance Deductibles?

By Guest | Jan 25, 2012

This is a guest post by Marcie McDonald. How do you save money on your insurance premiums? Would you like to share those tips with our readers as a guest article? Read the guidelines and go ahead.

Although most payments for your car, your mortgage and your credit card bills are nonnegotiable, one area where you have the power to determine how much you want to pay is your car insurance payments. This is because the amount you choose for your deductible makes a big difference in how much you pay each month. The lowest deductible you will likely see is $500, while on the higher end it can go all the way up to $4,000! Of course, the higher your deductible the lower your payments each month, and the lower your deductible the higher your monthly auto insurance payments. There are pros and cons to each argument, and this guide can help you determine which is the better option.

Higher Deductible, Lower Payment

For the many people who live paycheck to paycheck each month or find themselves with a limited income, it can be tempting to choose this option. After all, a lower monthly fee is what you will pay attention to, and can seem very tempting. However, a high deductible should only be chosen by someone who can spare the entire amount at any given time, in a matter of hours. If you have an accident tomorrow and need to pay a $3,000 deductible before the rest of the car will be fixed, can you afford that? If the answer is no, then skip the high deductible and low payments. The best candidates for high deductibles are those with plenty of savings and fewer financial concerns.

Lower Deductible, Higher Payments

Although this might seem illogical if you have a hard time paying your bills as it is, this is actually the best choice for those concerned with finances. You will almost certainly find a way to cover the final payment of your auto insurance each month, even if it is slightly higher in this scenario. If there happens to be an accident of some kind where your car is totaled, you might only need to pay a minimal deductible of $500 to have the whole thing repaired and even rent a rental car free of charge in the meantime. Unless you are very capable of setting aside money in the case of an emergency and budgeting carefully, the lower deductible and higher payments are the best choice for those with limited finances.

Saving for Your Deductible

Whether your deductible is $500 or $5,000, you should begin saving today to make sure you have the full value set aside at all times in the case of an emergency. For many people, this can be a challenge. If possible, create a separate account that holds the full value at all times. Do your best not to spend the money, because being faced with an accident and no money for the deductible can be a terrible situation to find yourself in.

Read the two options carefully to determine whether your financial situation is best suited for a higher deductible and lower payments or a lower deductible and higher payments each month.

Byline: Marcie McDonald is an insurance consultant who writes for cheapestcarinsurance.org.uk. She recommends checking online sites for cheap car insurance rates, and also to compare the best car insurance companies before making your choice.