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How to Choose the Right Deductible That Fits Your Budget

Looking for more affordable car insurance? Most people would recommend that you raise your deductible. However, depending on your life situation, an increased deductible may or may not be the best idea.

Your deductible is the amount that you’d have to pay if you were to get into an accident. The higher your deductible is, the less you’ll pay for your insurance premium.

A higher deductible, though, doesn’t always mean super cheap car insurance. More importantly, it could put you in a difficult position financially depending on your situation.

If you’re in the process of looking for cheap car insurance, consider these steps to choose a deductible that’s right for you.

  1. Choose a Deductible That You Can Afford

If you’re living paycheck to paycheck, and rarely put money aside into an emergency fund, choosing a high deductible may not be wisest choice. While a higher deductible may mean a cheap car insurance bill each month, it could also lead you to deep financial trouble if you were to be involved in an accident.

For that reason, you should choose your deductible based on what you could afford today should you get into an accident. If a $1000 deductible would put you out on the street, then you may be better off with a lower deductible, despite the higher monthly payments for your car insurance premium.

On the other hand, if you are a saver by nature, and have a good amount of money put to the side for an emergency, a higher deductible may not be such a bad idea.

Remember, cheap auto insurance with a higher deductible isn’t the most affordable option if the deductible would bankrupt you.

  1. Determine The Amount You’d Be Willing to Pay Before Filing a Claim

Filing an insurance claim usually means that you’ll be facing an increasedSaving money piggbank monthly car insurance premium. That’s why you may not necessarily choose to file a claim for minor damage, and instead, choose to pay for it out of pocket.

When choosing the right deductible for your situation and budget, you’ll want to think about just how much you’d be willing to pay before opting to file a claim should you get into an accident.

For example, if $750 in damage would lead you to file an insurance claim, you may be better off with a $250 or $500 deductible.

On the other hand, if you’d rather pay $750 out of pocket rather than file a claim and face an increase in your monthly car insurance premium, then a $1000 deductible may be a better option for you.

  1. Consider The Car You Drive

Depending on the car you drive, a higher deductible may not necessarily mean significant savings on your monthly car insurance premium, particularly with comprehensive car insurance policies. For some cars, increasing your deductible from $250 to $500, or $500 to $1000 would lead to minimal savings at best.

Paying off the difference in the deductible would take years! In such a case, it would make absolutely no sense to increase your deductible – it would likely cause you to pay more money in the end than you would with a lower deductible.

Before you opt for a higher deductible, talk to you auto insurance agent about the car you drive, and run a few rates with various deductible amounts. If a higher deductible would lead to minimal savings with your car, it would make more sense to choose a lower deductible.

  1. Don’t Forget to Consider Your Age

Just as your age can greatly impact that amount you’ll pay for your monthly car insurance premium, it can also impact the amount you’ll save with a higher deductible.

For most middle-aged drivers, a higher deductible does not necessarily mean great savings on car insurance, particularly if you have a clean driving record. A middle-aged driver might save $20-30 per year with a higher deductible.

On the other hand, the savings are far more significant for younger drivers. For drivers that are in their teenage years or their 20s, a higher deductible could mean hundreds of dollars in savings each year. Obviously, a higher deductible makes more sense for younger drivers.

In the end, a higher deductible could mean cheap car insurance – but that doesn’t necessarily mean you’ll save money. When shopping for new auto insurance, be sure to run a few rate comparisons with varying deductibles, and to also think about your life situation. Choose a deductible amount that is both affordable, and also maximizes the amount you’ll save on your car insurance premium.

  • Ways in Which to Lower Your Car Insurance Rates
Greg Fowler
I love to network, travel, and spend time with my children. When I am not doing that I am working on AutoInsureSavings or other websites. If I am working, the best way to reach me is via my Google+ Profile.

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