Whenever you purchase an auto insurance policy, you are asked to choose a deductible for physical damage coverage. The deductible is a set amount of money you will have to pay toward the cost of a claim you file. Keep this in mind as you choose your deductible amount. What you go for can have a significant impact on your coverage and how much you will end up having to pay overall.
Let's take a closer look at how deductibles impact auto insurance rates and how we should go about deciding on the amount.
Do Your Research
If your auto insurance policy includes collision and comprehensive damage coverage, then you agree to pay for certain damage done to the vehicle. However, you will quickly find that most insurance companies do not cover the costs 100 percent, so you share in the cost by paying a deductible.
The deductible amount you choose varies, but typical amounts to choose from are $500, $1,000, and $2,500. That is the amount of money you will have to pay before the insurance company jumps in.
Choosing The Right Deductible
Think about your deductible carefully because it is the amount you will pay out of pocket. You need to be sure you can afford it if you get in an auto accident. If it is easier for you to pay $1,000 than $5,000, then that is the amount you should choose.
Sometimes, choosing a higher deductible means that your premium costs will go down slightly. In doing so, you are taking some of the risk away from the insurance company, which results in lower premiums.
What Happens When The Damage Costs Less Than The Deductible?
If the damage to your vehicle ends up costing less than the amount of your deductible, then the insurance company will not pay the claim at all. So if you have $500 in damage to your vehicle and your deductible amount is $1,000, you will pay for the entire amount yourself.
Can You Update The Deductible Amount?
Most insurance companies allow you to update your deductible amount during your policy term and when your policy is up for renewal. Review your current policy to see what is covered and how much you are required to pay for damages before the insurance picks up the claim.
If you find that you cannot afford your deductible or premiums, then this is a sign that you need to reduce or increase coverage, depending on your current needs.
As you can see, the deductible is a big decision you need to make after doing your research and determining what you have available in your budget. The deductible you choose has a direct impact on your policy and coverage.
To discuss your auto insurance options or find a more affordable policy, do not hesitate to contact the experts at Panorama Insurance Agency today. We can help you determine how much coverage you should get and find the best auto insurance policy that fits your budget and suits your needs.