If you're old enough to buy and drive a motor vehicle, then you already know that in addition to gasoline, there's one ongoing expense you'll need to take care of. Auto insurance is something that most drivers in American states are legally required to have. It's financial protection for both you if you get into an accident that's not your fault, and other drivers if it is your fault.
As time has passed, we're fortunate that cars have been getting safer, but that doesn't mean you can just ignore your insurance and what it can do for you. One of the things you'll have to think about as you look at insurance is your deductible and how this will affect your finances.
What Is A Deductible?
If you get into an accident and you need to pay for repairs, auto insurance steps in to help with that cost. However, auto insurance does not pay the full cost of the repairs. There is some cost that you bear personally, and this is typically referred to as the deductible. The deductible is a set amount that you agree upon with your insurer to pay out of pocket. It means that you are willing to finance a certain amount yourself before the insurer steps in to cover the remaining repair cost.
Deductibles vary from one person to the next. Some people, for example, may set their deductible at $500. Others may choose to set it at $1000 or even more.
Higher Deductibles & The Long Run
While it might seem like the obvious thing to do is choose the lowest possible deductible for yourself, this does come with inevitable consequences. The lower your deductible, the higher the actual premiums will be that you pay every month. Conversely, if you choose a higher deductible for yourself, you will end up paying less every month on your premiums.
This means that drivers need to look at their financial situation and decide which position makes more sense. Paying less every month but facing higher personal costs if you do get into an accident? Or paying less in an accident but paying more every month?
How you choose what deductible you're comfortable with rests on a few different factors. Some of the most relevant include:
For example, suppose you feel that you don't like the idea of being on the spot for a lot of up front money in the event of an accident. In that case, you may feel more secure paying more money every month.
On the other hand, if you are confident that you are likely to avoid car accidents and don't think you will regularly rely on auto insurance to help finance repairs, you may choose a higher deductible for your savings to gain in lower monthly premiums. After all, why pay a lot of money every month for insurance you're confident you won't use?
If you're looking for auto insurance coverage for yourself, we can help. Contact Panorama Insurance Agency Inc. We can look at your driving and financial preferences and find the right coverage for you.