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February 19, 2016

Too High or Too Low, That is the Question

One of the hardest decisions you’ll have to make about car insurance is setting your deductible. Do you pick a high deductible, a low deductible or something in the middle? The deductible is what you pay out of pocket when you have a claim. So if you have a $500 deductible and you hit a deer, you’ll pay $500 of your own money for repairs, but the insurance company will pay the rest.

Car Insurance Too High?

The tricky thing about deductibles is that the higher your deductible is the lower your monthly premium will be. Insurers figure that if clients pay more in monthly premiums, they can cover more of the costs in the event of a claim.

Some will tell you it’s better to have a higher deductible to save more on your monthly bills, but others will tell you this strategy is a dangerous move that can leave you stuck with a massive unexpected bill. There are several pros and cons to both strategies that you should consider.

High Deductible

The biggest advantage of having a high deductible is the monthly savings on your premiums. If you go with a high enough deductible, you can save some serious cash in premiums. Here’s the downside. Let’s say you have a $1,500 deductible and a shopping cart rams into your car. If the costs of repair is only $400, guess who’s paying the bill? Anything under $1,500 will be paid in full by you.

If you go with this strategy, it’s a good idea to set aside some of the money you’re saving on your premiums and put it into a nest egg you can use in the event of a claim.

Low Deductible

While you will pay more in premiums, you’re also better protected if you need to file a claim. Let’s knock off a zero from our example above and pretend you have a $150 deductible. In this case you’re premiums will be higher, but that shopping cart will only cost you $150.

Lower deductibles cost you more month to month, but it does give you peace of mind that you’re only responsible for a small portion of the body shop bill.

If you have questions about which deductible is best for you, call All American Insurance Agency. We have more than 30 years of experience coaching clients through the insurance process and finding them the best policy.

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