One of the first and most important questions to ask before purchasing insurance is what deductible is best. Although it may be tempting to get the highest deductible possible to maintain a low monthly payment, this may end up costing in the long run, especially in the case of an emergency or accident. Determining the size of the deductible should be done taking into account a few key factors.
Above all else, consider what kind of cash is put away for emergency situations. If an emergency fund doesn’t exist, this should be a red flag that a deductible should be higher than someone who has $2000 stashed away. If a car owner can not pay the deductible, the insurance company can not do their part. Generally speaking, many policy holders have around a $1000 deductible. Unfortunately, statistics show that most of them can not pay this amount. Experts suggest considering stowing away $2000 in a safe place to take care of out-of-pocket expenses that may arise. This will give a decent monthly payment as well.
Costs of Deductibles
It is worth having a long conversation with an agent about how deductibles work for that particular company and having them sketch out on paper the ins and outs. In some cases, insurance companies penalize for using deductibles for certain emergencies or have a waiting period before their services can be used again. A higher deductible may payout in the end because the policy holder is covering more of the cost than the company. However, it is important to know how long it will be before recuperating the money that is lost in these circumstances.
The last thing to take into consideration is the value of the vehicle. If the vehicle is being leased or financed, the lender may require a certain predetermined deductible amount. This is also true in regards to having a loan on the vehicle or if the vehicle is paid in full. The more expensive the value of a vehicle, the more expensive the cost of the deductible and insurance overall. Therefore, the deductible should also be high in order to balance out the equation. This works in reverse as well. If the car’s value is low, so will the insurance and the deductible.
The Overall Risks
Doing research is the best way to stay prepared and to be aware of all the options available. Talking with an agent is the first step, but looking into Car Services Reviews will provide extra insight that may not always be given. Remember that dealerships want to sell and so do insurance agents. So, the information provided isn’t always going to be entirely accurate if it will compromise a sale.
A final word of advise is to those who consider using a rental services. Companies sometimes require a specific deductible on insurance policies, even if the renter is using a rental car. They may require the purchase of other insurance should the policy not be sufficient enough.