A deductible is required for some forms of vehicle insurance coverage. This is typically for comprehensive and collision coverage, although some states will also require a deductible for personal injury protection and uninsured or underinsured vehicle coverage. Your automobile policy agent can provide more insights into what applies in your state.
Choosing a deductible for your vehicle insurance policy is a crucial decision. Decide on the right deductible amount with the following in mind.
1. The Value of Your Vehicle
Your car's current market value will significantly impact the premiums you pay for your auto insurance policy. You can offset the expected high cost of premiums for a high-value car by choosing a higher deductible amount.
However, it's cheaper to get an automobile policy for a car of lesser value. In this case, you don't want to go for a higher deductible amount that may not even be worth it as your car continues to lose value.
2. Driving Risk Profile
In addition to your driving habits, consider where you drive, how far, and how often you drive when choosing a deductible amount for your auto insurance policy. With this in mind, if you are a high-risk driver that typically drives long distances and in an area with frequently reported accidents, you best go for a lower deductible.
The higher the risk of being involved in an accident, the lower your automobile policy deductible amount should be. Under these circumstances, you are more likely to end up in an accident and will have to pay the deductible.
3. Value of Emergency Fund
How much do you have in savings as your emergency fund? Because the deductible is what you will pay out of pocket, your emergency fund should match, or better yet, exceed your auto insurance policy deductible.
If you aren't too confident about being able to raise the deductible when required, best to opt for a lower amount. It will undoubtedly give you some peace of mind.
Minimum Required Deductible
Whether or not a minimum required deductible applies for your auto insurance policy depends on the state you live in and your insurer. Many insurers set the minimum deductible amount at $250 and higher for higher-risk drivers.
Get Expert Advice
Your insurer can advise on when to choose a higher or lower deductible amount for your auto insurance policy. Present the facts of your situation with particular attention to your car's value, your emergency fund, and your risk profile.
Contact an auto insurance agent to learn more.
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