November 16, 2010

Determining The Right Deductible Amounts For Your Auto Insurance Policy

When it comes to auto insurance, there are many terms and conditions, limitations, coverages, and exclusions that a policy holder must be aware of before purchasing a policy. A driver can choose to walk into an insurance agency, call them for a quote, or obtain auto insurance online. No matter which method a person uses, these components are always the same.

Auto insurance is comprised of several different coverage options; however, liability insurance is one coverage that is mandatory in most states. Liability will protect a driver against expenses they incur from causing property damage or injury to another driver, pedestrian, or passenger. There are optional insurance products that can also be purchased, such as collision and comprehensive coverages. Both of these protect a driver from financial loss due to physical damages to their own vehicle. Collision will cover damage caused by a collision with another vehicle, object, or person. Comprehensive coverage will cover damages caused by fire, theft, or vandalism.

Both collision and comprehensive require the driver to pay a deductible in the event that they file a claim. A deductible is a set amount that the driver must pay before an insurance company will pay their portion of a claim. The purpose of a deductible is to reduce the number of small dollar amount claims. If a person has a deductible of $500, they are not likely to file a claim for only a few hundred dollars.

The minimum amount of a deductible is usually set at a certain amount and if the driver wishes to increase the amount of the deductible, it is totally up to them. Increasing the amount of a deductible will lower insurance premiums, but it is important to remember that if you need to file a claim, you still have to afford the deductible.

Newer vehicles that are being leased or financed must carry collision and comprehensive insurance so that the financial institution can collect their portion of the money should a claim be filed. For older vehicles, you will need to determine if it is worth having these coverages on the vehicle. In some cases, the deductible you pay may be more than the vehicle is actually worth. So, you may want to consider removing collision and comprehensive coverage from your policy.

Choosing the amount of an insurance deductible is really a personal choice. Of course, there are minimum deductible levels that are required, but in most cases, a person can opt to raise these deductibles to a higher level. Always discuss this option with your insurance agent or if you are checking auto insurance online and ensure that this decision is the right one for you.