When To Switch To A High Deductible Car Insurance Policy
Deductibles are never loved in any type of insurance. They are the out-of-pocket expense that a policyholder must pay before the insurance company pays out any of their own money. People would generally prefer to have as low of a deductible as possible. However, when it comes to auto insurance, there are times when a high deductible is preferable to a lower deductible. The benefit is always a lower premium. However, there are factors to consider other than just looking for the lowest car insurance quotes.
The first question to ask should be this – how much money is saved from a higher deductible? For example, take a policy that costs $1,000 a year for a $200 deductible, but only $700 a year for a $500 deductible. If the policyholder thinks of it as paying a thousand dollars no matter what, keeping any extra as savings to balance out the deductible, then after a year, the cost is the same. However, if the policyholder keeps his insurance for more than a year, then it is financially beneficial to use the higher deductible. Therefore, it is important to consider the length of a policy when asking for an auto insurance quote. If money is saved given the expected length, then it is beneficial to switch to a higher deductible.
There are other factors to consider besides savings. First, in case of an accident, can a policyholder afford the deductible? If the deductible exceeds savings, then the deductible is too high. Also, what is the percentage of the deductible compared to the value of the policy? For example, a $100,000 policy with a $1,000 deductible covers 99% of the value. A $15,000 policy with a $1,000 deductible covers 93% of the value, significantly less. Policyholders need to look for value, not just the lowest auto insurance quotes. Finally, mileage must be considered. Risk increases directly with miles driven. Unfortunately, accidents do occur, and the more a car is on the road, the greater the risk for an accident. However, if a policyholder drives only a couple thousand miles a year, the risk of an accident is decreased, and a high deductible insurance is recommended.
To summarize, insurance is protection from possible harm. Auto insurance is protection from harm due to a person's car. If the risk of harm is low, then a higher deductible will still afford an acceptable level of protection in case of a serious accident. And so the bottom line is this – high deductible car insurance is best for major damage. $1,000 is nothing compared to the possible financial damage which could occur from a major accident. Consider the facts and decide whether a higher deductible suits your needs.