The Best Car Insurance Deductibles
- Unfortunately, if you financed the purchase of your vehicle, you will likely have little input into the deductible amounts you carry. By financing, you create a situation where the lending company holds a lien on a vehicle until the loan is paid in full. This gives the lender the right to dictate the deductible amounts, and it will generally choose lower deductibles to protect its interests, such as $100 for comprehensive and $500 for collision. Lower deductibles mean higher premiums for you. You will be able to carry lower deductibles than what the lender stipulates, but not higher.
- If you own the vehicle free and clear, its age is an important factor in determining the best deductible levels for you. As vehicles age, they depreciate in value and you'll receive less from your insurer in the event of a claim. As a rule of thumb, the older the vehicle, the higher the deductibles you should carry. According to the Insurance Information Institute, raising your deductibles to $1,000 can save you as much as 40 percent on your premium.
- In some cases, it can make sense to drop comprehensive and collision coverage altogether, as the vehicle's diminishing value can mean that continuing to pay the premium is not a cost-effective strategy. Another rule of thumb to consider is to drop comprehensive and collision when the vehicle's Kelley's Blue Book Value is less than 10 times greater than the comp and collision premium.
- Affordability plays an important role in your selection of the best compfrehensive and collision deductibles. Lower deductibles mean you have to pay less out of your own pocket in the event of a loss, but they also mean higher premiums. If you elect to go with higher deductibles or drop comprehensive and collision entirely, you will need to have money set aside to pay for repairs or to purchase a new vehicle if necessary.