Understanding Car Insurance Deductibles

Understanding Car Insurance Deductibles

Understanding Car Insurance Deductibles

When you are shopping for car insurance, one of the terms you’ll come across is ‘deductible.’ This is the amount of money that you have to contribute towards the repair of your car should you get into an accident and claim for repair costs. The insurance company then covers the rest of the repair expenses. For example, if your car repair bill comes to $2000 and your deductible is $500, the insurance company pays $1500, and you pay the $500.
Choosing an insurance plan with a higher deductible can significantly lower your premium payments. However, there are a few factors to consider when setting your deductible.Your driving recordIf you have a clean driving record and have gone a couple of years without having any own-fault accidents, it is relatively safe to predict that you are at low risk for future accidents. This means you can benefit from having lower insurance premiums by increasing your deductible. Similarly, younger, less experienced drivers or drivers who are prone to accidents could opt for a plan with a lower deductible but higher car insurance premiums.

Financial Status

Because you cannot predict when you may need to make a claim, your deductible should be an amount you can reasonably afford in the event of an accident. This will be determined by your income level, credit rating, and savings. If you cannot afford an emergency car repair bill of $1000 for example, you should opt for car insurance with higher premiums and lower deductibles. The advantage of this is that you can structure your payments to an affordable monthly rate and spread the risk throughout the year. Youi Car Insurance https://www.youi.com.au/car-insurance

Car Value

If your vehicle is new, the collision and comprehensive deductibles will often consist of a small fraction of its value. This means you have more discretion when choosing the deductible. Your choice will probably be determined by other factors including affordability and claim history. However, if you have an older car, it is valued at less, meaning the ratio between the claim limit and the deductible doesn’t favor you. For example, if your vehicle is currently valued at $1,200 and the deductible is $500, this means the car insurance will only pay claims of up to $700. Additionally, insurance premiums are higher for older cars than newer ones. In such a scenario, you may have to reconsider the value of the collision and comprehensive coverage for your car

The good news is that you don’t have to figure out the right car insurance deductible by yourself. Your insurance agent or broker can help you make this decision based on your needs and record. It’s always a good idea to plan for the worst case scenario by opting for an insurance plan with a lower deductible. This will ensure that in the event of an accident, your out-of-pocket expenses are minimal and you can have your car up and running in no time. You can then look for other discounts from the car insurance company to compensate for the higher premiums.

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