August 15, 2011

When To Choose A Low Car Insurance Deductible

Car insurance experts usually recommend a low car insurance deductible, but for many drivers, a low deductible can quickly inflate the cost of a policy. When choosing deductibles, it's difficult to imagine an accident and the financial burden that a high deductible can put on a driver, but unfortunately, big accidents happen. Before choosing a policy, drivers need to to carefully consider whether a low car insurance deductible is actually worthwhile and how premiums might increase as a result of lower deductibles.

A good tactic is to calculate the cost of a low deductible over the course of a year and to compare this amount with the cost of a high deductible. Drivers can do this easily by looking for car insurance quotes for both high and low deductible policies. Take the monthly premium for each deductible amount and multiply it to find the yearly premium. A low deductible is worthwhile when the difference between the premiums is significantly less than the value of a vehicle. For instance, if an older car is worth about $2000, and a low deductible policy would cost $400 more than a high deductible policy over the course of a year, the low deductible would probably be worthwhile. If the difference was closer to $1000, the low deductible policy might not be worth the extra money, because the insurance policy would have a higher overall cost of ownership unless a claim was made within the first few months. As most car insurance policies have several deductibles for different types of coverage, it may be necessary to do a separate calculation when choosing deductibles for each type of coverage.

A high deductible can quickly make an insurance policy near-worthless. For instance, if a driver's primary vehicle is worth about $3,000, a high $2,500 deductible would make collision and comprehensive coverage a complete waste of money. Likewise, high liability deductibles could bankrupt a driver after a serious accident. Ultimately, drivers need to decide for themselves whether a low car insurance deductible is worth the money, but as price differences between low and high deductible policies aren't usually very extreme, low deductible policies tend to be the reasonable, safe choice.

Many drivers avoid low deductibles because of the effect that a low deductible can have on a car insurance policy's premiums. However, there are a number of ways to get low premiums without sacrificing coverage; drivers can ask about insurance discounts or look online for better car insurance quotes. A low car insurance deductible can greatly add to the total value of a policy, so drivers should explore all of their options to keep good coverage and a low rate.