December 27, 2011

Avoiding A High Deductible When Shopping For Auto Insurance Online

One of the pitfalls in obtaining auto insurance online is the tendency to choose a high deductible in order to lower premium costs. Many drivers do not realize that there are consequential negative considerations inherent in selecting a high deductible. Another consideration is that it may only lower the premium a few dollars monthly, which is not economically consistent or a relevant consideration in the event of a claim. Ironically, the first consideration should not be lowering the premium but ensuring that there is adequate indemnification in the event of an accident.

For example, when shopping for auto insurance online, a deductible of $1,500 may result in a premium $50.00 a month lower than a $250.00 deductible, which translates into a savings of over $600.00 per year. However, the realistic consideration is that in the event of an untimely accident in which the insured is at fault, he or she will have to pay $1,500 out of pocket before the policy will pay one dollar. This is a considerable amount of money to have to pay and realistically, the insured may not have that much disposable or dispensable cash on hand at the time. In this situation, a lower deductible would be more feasible as it would provide the desired indemnity for the insured's vehicle. The insured should first consider how much they can afford to pay out of pocket at any given time before choosing a high deductible on an auto insurance policy online.

There are other ways to lower the premium without sacrificing peace of mind and financial security. One method is to minimize or forgo comprehensive and collision coverage especially on an older vehicle. This will appreciably lower the policy premium rates. The insured must realize that in minimizing or lowering comprehensive and collision coverage in the event of an accident in which they are at fault, they will be responsible in part or, if the coverage is eliminated, completely responsible for the replacement of their vehicle. However, on older vehicles, this coverage over a period of time can exceed the cost of replacing the vehicle. If the insured has a good driving record and is a careful and conscientious driver, this may be a way to avoid the high deductible on auto insurance online.

Another critical way to avoid attempting to reduce auto insurance premiums through choosing high deductibles is to eliminate policy additions or add-ons such as rental reimbursement or gap insurance. If the insured has a second vehicle, rental reimbursement is actually unnecessary. Additionally, "gap" insurance is only advantageous in the event that the coverage is on a brand new vehicle or an unusually expensive vehicle.