When it comes to auto insurance, there are few aspects of an insurance plan that are more important than a deductible. To understand what kind of deductible you should attach to your car insurance policy, you need to think about how much money you have in your rainy day fund. The deductible has the biggest impact on how much you are going to have to pay out of your own pocket when there is some serious damage to your car, so it’s important to think about the right sized deductible for your wallet. By taking a look at the details of how deductibles work and when they are used, you must first understand what they are in the first place.
What is a Deductible?
The deductible on your car insurance policy is the amount that you will have to pay out of your own pocket before your insurance company decides to help you out. For example, if you get into an accident and the damages to your car are going to cost $5000, then you will only have to pay up to your deductible when you bring your car in for repairs. The insurance company will take care of the rest of the costs. If you are someone who does not have a lot of savings or you do not have a rather high salary, then you will probably want to go with a low deductible to care of all of your problems when something does go wrong.
What Should Your Deductible Be?
You may be thinking that finding the lowest deductible possible for your car insurance will be the best way to go, but that is not always the best route to take. The fact of the matter is that your monthly payments will be much higher if your deductible is ridiculously low. Choosing your deductible amount is a balancing act between how much you think you will be able to pay in case of an accident and how much you are willing to pay for insurance on a monthly basis. If you were in an accident today, how much would you be able to pull out of your savings to cover the cost of repairs? Your deductible should not be equal to the total amount of money that you currently have in the bank, and it is usually a wise decision to choose a deductible that you would not really miss if you were forced to pay it.
Your Deductible Will Not Be Your Friend’s Deductible
It’s important to realize that you need to make your own decisions when it comes to choosing a deductible. Every situation is going to be different, so it only makes sense to go with what works for you. It’s important to remember that you don’t need to rush into an unwise deductible selection. Take the time to do the math involved with your own personal life, and see what kind of deductible makes sense for your financial situation. If you think that you would have a hard time coming up with the cash to pay for any kind of serious car damage, then you may want to take the safe road and get auto insurance with a low deductible. Some people are fine with taking the risks of a deductible that they will not be able to afford, but most people do not want that monkey on their back while they are driving to work every day.
Use a Car Insurance Deductible Calculator
If you do not think that you will be able to figure out the right deductible amount for your situation on your own, then you can always use an online deductible calculator. You will just need to enter some information about the value of your car, how much money you have saved up in the bank, and how much disposable income you have on a monthly basis. Once you enter those figures, the calculator will take care of all the hard work for you. Sometimes it is better to double check your own math with these calculators to make sure that you are making the right financial decision. You would not want to sign a car insurance contract that involves a deductible that does not properly protect you in case of an accident.