October 6, 2009

What Is A Deductible And How Do You Determine It For Your Auto Insurance Policy?

For new drivers, dealing with auto insurance can be confusing and scary. But it's not so hard to understand once you have all the information. Popular words you hear in insurance speak are "deductible" and "premium." An auto insurance deductible is the amount of money you pay towards a claim before your insurance will begin covering damages. For example, if your claim after a car accident is $500 and you have $250 deductible, you are required to pay $250 and your insurance company will cover the remaining $250. Don't stress out too much; there is no "right" or "wrong" option when it comes to deciding what you want your deductible to be. It's just a matter what you're willing to pay out of pocket.

Before you decide which deductible is the best for you, understand what an auto insurance deductible is and how it works. The lower the deductible, the less you will pay in the claim, but the more you will pay each month in your premium. The higher deductible you have, the more money you will pay in the case of your claim, but your premium will be a lot lower. So you'll have to decide if you would rather pay more each month for a low deductible or less each month for a higher deductible.

A $100 auto insurance deductible is the least common and most expensive in terms of the rates you will pay. A $250 deductible is uncommon as well, though certain people within the "preferred market" do hold this sort of auto insurance policy. This group is made up of drivers who have very low risk factors. A $500 auto insurance deductible is the most common option, but it might not always be the cheapest. For example if you're in a car accident and there is $500 worth in damages, you'll be footing the whole bill out of pocket. Not to mention your monthly auto insurance policy premiums will also still be relatively high on this deductible level. Another common choice is the $1,000 deductible. While $1,000 is a lot to pay, your monthly insurance payments won't nearly be as high as they would be if you chose to go with a lower deductible option.

The biggest factor in choosing which deductible is the best option will ultimately be the price. Call different auto insurance companies, or go online, to get the best quote. By comparing different quotes, you will be able to see which company can offer you the best insurance for less. By doing so, it's very probably that you will be able to get the best auto insurance policy for you at the lowest price possible.