A car insurance deductible is the amount one pays out-of-pocket in the event of a claim. Deductibles of $100, $250, $500 and $1000 are common. Many motorists opt for a low $100 deductible because of that uncomfortable thought of having to suddenly shell out cash in the event of a claim. However, higher premiums for extremely low deductibles may largely offset the lowered expense when, and if, a claim does occur.
A Mid-Range Deductible
For many drivers, an optimum deductible may be more in the middle range. One takes on a little more risk, but consider the premium savings that accrue every month. Additionally, it may be months or years before an out-of-pocket expense of any kind ever occurs. Every claim-free month that one drives is another month of accrued savings.
Impact of Fixed Costs
One reason that low deductibles are a less prudent buy is summed up by one phrase: administrative costs. It costs an insurance company a fair amount to process each claim, whether it’s for a $300 windshield or $6,000 worth of body damage. Therefore, the luxury of a $100, or even a $250 deductible is just that, a bit of a luxury.
Not everyone will want to assume a thousand dollars’ worth of risk, so a $1000 deductible may be a less common choice. However, the selection of a $500 deductible may represent, for many, an ideal balance between premium savings and risk.
Of course, other variables come into play when decisions need to be made about the level of deductibles for both collision and comprehensive coverages. In some cases, maintaining comprehensive coverage on an older vehicle may not be prudent at any level. At the same time, if the vehicle is leased, the leasing company may require certain levels of car insurance to protect their investment in the vehicle that the lessee is driving.
One final tip: Use the premium savings to set up an auto emergency fund. Then, if the unexpected does occur, you'll get your repair in a manner that is as financially stress-free as possible.
Save on the coverage you need. Call McDonald Insurance Group at 303-957-1742 for more information on Littleton auto insurance.