High or Low deductible?

High or Low deductible?

Insurance deductibles are the amount payable by the policyholders to the car insurance companies at the time of filing a car insurance claim. When you purchase your car insurance policy then you select different types of insurance coverage. Insurance deductibles are not required by every type of insurance coverage. If you select uninsured or underinsured motorist or liability coverage in your car policy then insurance deductibles are not required. You need to set insurance deductibles if you include collision coverage or comprehensive coverage in your car insurance policy. You can set the amount of deductibles by yourself. If you choose high deductibles then rates of car insurance will also be low. The cost of car insurance is high if you choose low deductibles. Many policyholders set their insurance deductibles at $500 or $1000. 

Insurance deductibles are paid by the policyholder to the car insurance company when filing a car insurance claim before the recovery of the losses.

How does an insurance deductible work?

  • For example, if you have an accident with an animal and your car gets seriously damaged. You can cover the damage caused by accidents with animals if you have comprehensive coverage in your car insurance policy. Let’s say the cost to fix the damages to your vehicle is $4500. You can recover the cost after the payment of deductible to the car insurance company. If your deductibles are $1000, then you will have to pay $1000 from your pocket to the car insurance company. Car insurance companies pay you the remaining $3500 to cover your loss incurred by the accident. 
  • If the cost to fix the damages is less than or equal to the amount of deductibles then it is worthless to file a car insurance claim to recover the losses because after filing claims car insurance companies can raise your car insurance premiums.

Advantages of low deductibles

  • Low deductibles are beneficial for those people who have a low budget.
  • Some car insurance companies offer car insurance policies with zero deductibles.
  • Low deductibles are affordable for low-income group drivers. You can set low deductibles according to your affordability.

Disadvantages of low deductibles

  • You will have to pay higher monthly car insurance premiums if you set low deductibles.
  • Low deductibles have a negative impact on the cost of car insurance policies. Low deductibles increase the cost of car insurance policies.

Advantages of high deductibles

High deductibles help to reduce the cost of the car insurance policy. If you set high deductibles then it will automatically decrease your monthly car insurance premiums. If you raise your insurance deductibles from $500 top $1000 then you could easily save 30-40% on your car insurance policy. You will have to pay deductibles only when you want to file a claim. 

Disadvantages of high deductibles

  • By choosing high deductibles you can save only on comprehensive coverage or collision coverage, not on the entire car insurance policy.

What is a good deductible for car insurance?

  • Some experts say that most drivers set deductibles at $500 or $1000. If the chances of accidents are more then you should select high deductibles for collision coverage than deductibles for comprehensive coverage.
  • If you are more concerned about the damages from theft, vandalism, or bad weather then it is good to set high deductibles for comprehensive coverage than the collision coverage. You should set your insurance deductibles carefully because you have to pay it when you make a claim.
  • If you cannot afford then you should avoid setting higher deductibles. 

You may be required to set low deductibles if you have a financed or leased car. 

Why do lower car insurance premiums go with higher deductibles?

  • Car insurance premiums also depend upon the amount of insurance deductibles and type of coverage limits you choose in your car insurance policy.
  • Car insurance companies reduce your car insurance premiums if you set high deductibles on comprehensive coverage or collision coverage. If you set high deductibles then you need to pay the low cost on a car insurance policy from your pocket. 
  • You should not set extra high deductibles to decrease the cost of car insurance policy, it will put heavy expenses on your pocket. To get the cheapest car insurance policy there are different ways rather than set the extra high deductibles.


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