Will Your Deductible End Up Costing or Saving You Money?
The biggest component that drives the pricing of auto insurance is the deductible – the amount of out-of-pocket expense you must cover before a claim is paid. The amount of your premium payment is based, in part, on the amount of your deductible. If you select a low deductible, you will pay a higher premium.
Many people are concerned with the possibility of having to come out-of-pocket with a lot of money to repair their car in the event of an accident, so they will choose a low deductible. While they may feel some level of comfort knowing they will not have to spend as much of their own money, they may be spending hundreds of dollars more to pay the additional premium costs. The better strategy for most people, especially if the car is older, is to select the highest deductible and then bank the difference in premium. Better to have that money accumulating in an emergency fund than in the pockets of an insurance company.