If you want to save money on your auto insurance rates, consider which deductibles are most advantageous to you in the long run. Deductibles are those amounts you have to pay upfront before your insurance company will pay a claim. The higher deductible you have, the less you pay in annual premiums because you are sharing the risk if you are involved in an accident.
Too often drivers assume it is in their best interest to have a low deductible so the insurance company pays more on claims. But this is not always the case. There are two primary factors that determine the deductible that is best for your situation.
The first factor is your ability to pay the deductible if you are involved in an accident. If you are able and willing to pay a higher amount, and you have a good driving record, you can save thousands of dollars by accepting the higher deductible.
Remember that you can get out of purchasing insurance altogether if you can prove you have the financial means to pay for vehicle damages and medical expenses if you cause an accident. You can use the same logic to determine the amount of deductible you need to reduce your risk and save money.
The second factor is the type of coverage you are purchasing. Not all coverage has deductible options. Coverage for vehicle damage has deductibles. This includes collision and comprehensive coverage. If you have an older vehicle, consider what the insurance company will actually pay if you submit a claim. It may make more sense to have a higher deductible and save money. However, if you just bought a car and are required by your lender to have full coverage, you may want a lower deductible to reduce your financial risk if you are involved in an accident.
Personal Injury Protection (PIP) also includes a deductible. Many states require drivers to have this type of insurance. But if you have personal health insurance, you can accept a higher deductible on your PIP and reduce your annual premiums. Your health insurance can cover your medical expenses if you are involved in an accident.
It is not uncommon for insurance companies to offer a limited selection of deductibles. If you are not happy with your insurance company's options, talk to other auto insurance providers . You can also shop online for auto insurance that has the deductible and coverage that is best for you.