Will drivers remorse having set their auto insurance deductible too excessive? – coloured idiot
When buying auto insurance, motorists have many options. One of the most important decisions concerns the amount of your deductible. It is tempting to set a high car insurance deductible as it can result in lower car insurance premiums. But drivers could quickly regret this decision.
Car insurance deductibles can sometimes be difficult to cover
The first thing to understand is what a deductible is to see why motorists might regret overstating theirs.
A deductible is a certain amount that a policyholder has to pay out of pocket in the event of an insured loss. The insurer does not begin to pay compensation until the deductible has been met.
For example, let's say a driver has collision insurance that pays off to repair or replace his vehicle after an accident for which he was responsible. If the driver has a $ 2,500 deductible and has suffered $ 3,000 damage to the car, the driver is responsible for paying the $ 2,500 deductible before the insurer pays anything. In that case, the driver would cover almost the entire cost of the accident, and auto insurance would only return $ 500 for the remaining losses.
Understanding how deductibles work makes the potential problems with a high deductible clear. Raising so much money out of pocket can be a serious financial burden for many people.
Some drivers who set a $ 1,000 deductible or a $ 2,500 deductible may simply not have the money to cover those costs if something goes wrong. This can create huge problems as they may go into debt or have to wait until they can afford their part of the repair before their car can be repaired.
Which deductible size is best?
A high deductible can be a mistake in the event of an accident. But it's also important to remember that the lower the deductible, the higher the premiums for auto insurance. As a result, motorists may also not want a deductible that is too low as it could result in a very high monthly car insurance bill.
Ultimately, each and every motorist must decide whether they would rather pay more premiums every month to avoid a huge bill if something goes wrong, or whether they would rather keep their running costs lower and be ready to cover thousands of dollars in damage when a hidden problem arises.
When making this decision, drivers should consider whether they have an emergency fund that can cover the amount of the deductible. For those living from paycheck to paycheck and struggling badly to save enough to pay a deductible, it might be worth paying higher premiums so as not to get into a difficult situation. But drivers with a hefty emergency fund who could easily cover the bills can opt for a higher deductible knowing they have everything covered.