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Car Insurance
Is it better to have higher or lower deductibles on my policy?
Deductibles are your part of the payment towards insurance coverage.
For example, let’s say your deductible is $500 and your car gets into an accident in which the damage payments are $1,500. Then, you will pay the first $500 of damages, and the remaining $1,000 will be paid by the insurance company.
The amount paid as deductible varies from state to state. Generally, the amount ranges from $100, $250, $500 or $1,000. If you decide to take up a higher deductible policy, then your insurance premium will come down, which mean lower insurance costs for you. Does this mean higher deductible is the only choice?
Not really!! If there are more chances of an accident happening because of reasons such as:
- living in an area which is more prone to accidents or
- driving around a lot or
- you have been involved in accidents before
taking a lower deductible could be a better alternative.
Your driving record is a point that you should consider when deciding whether to take higher or lower deductible. If you have been a safe driver and not been involved in any accident, you can go in for a higher deductible. On the other hand, frequent accidents in the past indicate an increased likelihood of another accident, so it would be better to take a lower deductible.
On the whole, choosing a higher or lower deductible depends on two important factors, one - how much you are willing to pay and the other how often you think you will need to make an insurance claim.
You need to consider the following factors. If you have been in multiple accidents, do a significant amount of driving or live in an urban area where accidents or theft are more common, you may want to consider having a lower deductible as there is a higher likelihood of an accident. If you live in a rural area, or do not do a significant amount of driving, you may want to opt for a higher deductible, as there is a lesser likelihood of an accident.
It boils down to risk. Take a good look at your policy record over the last few years to decide how much of a deductible to carry and to assess what amount of risk you are willing to take. If you’ve been driving for years without an accident, the likelihood of an accident is lower, than if you’ve experienced several accidents in the past.
Compare before purchasing. It is wise to compare the differences in insurance rates before deciding on deductible amounts, as the rate difference between deductibles may be substantial with some insurers and quite insignificant with others. Shop around, compare and educate yourself to save the most money!
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