Managing Deductibles For A New Automobile Insurance Policy
It's all over the radio, the TV and even in the inserts that make it into most people's mailboxes – switching automobile insurance can save people money. Whether that is true or not, of course, depends on the individual's current auto insurance carrier and his or her driving record, among other factors. However, whether or not an individual saves money, new auto insurance means a new car insurance deductible. Managing a new deductible is an important component of an individual's financial management because managing that deductible improperly can cause a whole host of insurance and other types of financial problems.
Before learning how to manage an auto insurance deductible, individuals must understand what an automobile insurance deductible is. The deductible is the amount an individual pays out of pocket before the insurance company will start covering costs. For example, if an individual has a $1,000 deductible and gets in a car accident that causes $2,000 worth of damage, an individual must pay $1,000 before the insurance company kicks in the rest.
Because individuals are required to pay the car insurance deductible before the insurance company makes payments, individuals must be prepared to pay that deductible should the unthinkable occur. For this reason, an integral part of managing an auto insurance deductible is saving up enough money to pay that deductible if needed. Individuals should have a sum equal to their deductible laid up in savings that they do not touch. This way, they will not have to experience delays or engage in risky practices like taking out loans to try to get the deductible together.
Another important component of managing the car insurance deductible is understanding how it will affect rates. Automobile insurance rates are higher when deductibles are lower. Individuals who choose higher deductibles pay lower rates. At first, it might seem like the best choice is to always choose the higher deductible. However, not all families can afford to save money to pay for their deductibles if need be. These families may prefer the higher premium – the term for an automobile insurance payment – option.
Finally, the last aspect of managing an auto insurance deductible is understanding when that deductible resets. Usually, this is at the end of the year. At the beginning of the year, the insurance holder must generally face the entire deductible again. This can be frustrating, especially if an individual just paid the entire deductible in November of December. However, planning for this problem can help insurance holders budget.
Regardless of why they are switching auto insurance companies, new insurance holders have new deductibles. Managing them well can help them save money.