When you compare car insurance quotes, you get to decide how big or small your deductible is. Here’s a guide to selecting the deductible that’s right for you as an auto owner.

How deductibles work

If you have a claim, your deductible is the amount of money you must pay before you get any payment from your insurance company.

For example:

If you have a fender-bender that will cost $2,000 to repair, and your deductible is $1,000, then you will have to pay $1,000 out-of-pocket toward the repair cost and your insurance company will pay the other $1,000.

Choosing the right deductible: It’s a balancing act

The lower your car insurance deductible, the higher your premium, because you’re asking your insurance carrier to take on more financial risk. If you choose a higher deductible, you’re assuming more of the risk if you have a claim – so your carrier says “thank you” with lower insurance premiums.

(Something to keep in mind: It’s not a dollar-for-dollar trade, so choosing a $1,000 deductible over a $500 deductible won’t reduce your premium by $500.)

Two questions to ask when you’re choosing your deductible

As you’re making the deductible decision, take a hard look at your personal financial situation, and then ask yourself:

  1. How much per month can I afford to pay for car insurance?
  2. How much could I afford to pay out-of-pocket if I had an accident today?

They’re important questions, because car insurance is about getting you back on the road ASAP so you can get to your job, transport your kids, and do all the other things you need your car for.

Say you choose a low premium, but then have to go carless for a longer period of time after an accident because you need time to scrape together money to cover your deductible. You’re not really getting the best value from your policy.

On the other hand, if you can budget for a higher premium that brings your deductible down to a comfortable level, you’ve struck the right balance.

What about “vanishing deductibles?”

You’ve probably seen the TV commercials for insurance policies that reduce your deductible if you stay accident-free for several years. Sounds like a great idea, but there are catches. When you do the math, you may do better with “safe driver” premium discounts.

One final note: Please remember that auto insurance coverage is mandatory in Florida and Alabama. Through Pen Air’s relationship with TruStage Insurance, you might be able to save money on your auto policy.