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What should I consider when choosing my deductible?

If you carry collision or comprehensive coverage on your auto insurance, you will have to choose your deductibles when you set up your policy. Most insurers provide policyholders with four or five different deductible options from which to choose. The deductible you select is the amount you agree to pay without your insurer’s assistance in the event of a covered loss. Although you are free to choose any deductible you wish, some deductibles may be inappropriate for your needs. Read on to learn more about setting your own car insurance deductibles.

Possible Deductibles

Every insurance carrier will offer different deductible possibilities to its policyholders. Most commonly, however, carriers offer auto insurance deductibles that range from $100 to $1,000. The typical increments are $100, $250, $500, and $1,000. Some insurance companies may offer $0 deductibles, while others offer deductibles of over $1,000. To an extent, you can set your own deductible by choosing any one of the possible deductibles offered by your carrier. However, you cannot pick a number arbitrarily. You will have to choose one of the predetermined deductible amounts offered by your auto insurer.

Why the Limited Options?

The level of your deductible will directly and profoundly impact the premiums you pay for your auto coverage. Insurers have adjusters perform complex calculations to determine an appropriate premium for each deductible level. For this reason, most insurers only offer four or five possible deductibles. Their adjusters have already computed the premiums for these figures, which makes it quicker and easier for your insurer to set your rates. If every policyholder had an unlimited number of deductible choices, the underwriting process would be prohibitively complex and laborious.

Setting Your Deductible

When you set your car insurance deductible, your main concern should be how it will affect your premiums. Although low deductibles may seem attractive, they will drastically raise your auto insurance rates. The less you’re willing to pay in the event of a loss, the more your insurer will charge you for coverage.

Usually, experts advise policyholders to set their deductibles as high as possible and then put what they save on premiums into a savings account. This way, you’ll have a source of funds to turn to when/if you have to make a claim and pay your deductible. Remember that you don’t know if you will ever have to file a claim, which means you may never have to pay your deductible. However, you do know that you will have to pay your car insurance premiums regardless, so it makes more sense to keep your deductibles high and your premiums low.

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Posted 1:23 PM

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