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Choosing Deductibles for My Car Insurance

Written by Doug Cohen

The Affordable Deductible

Itís easy to agonize over setting your insurance deductibles. Fortunately, there is a basic formula you can use to get started. Setting higher deductibles brings your insurance bills down, while lower deductibles mean you pay less out of your own pocket if you have an accident. Some people become fixated on their insurance premiums but forget about how the out-of-pocket expenses of an accident can exceed the monthly savings of higher deductibles.

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Most people trying to set deductibles for car insurance want to find a happy medium between the right coverage and the right price. Ensurance.com president Doug Cohen offers some good advice on how to get closer to the middle ground between good protection and affordable premiums.

"Calculate what your threshold is for turning in a claim. If you know for example that you will never turn in a $250 claim for fear your rates will go up, or just wanting to keep a clean record with your insurer, then why do you carry a $100 deductible? People often brag about how low their deductibles are, never realizing that they're generally paying more money to carry a low deductible. So figure out what you are comfortable paying in the event of a claim, be sure that is in line with your threshold for reporting a claim or not reporting a claim, and then do a cost-benefit evaluation."

You can also evaluate your risk for a certain type of claim against the chances of using other parts of your insurance policy. Do you carry comprehensive coverage but know you wonít turn in a claim for chipped paint after a hailstorm? You could carry a higher deductible on comprehensive in favor of a lower deductible on the parts of your plan you think you may need the most.

Cohen says people who want to save money on their insurance premiums should try saving in other areas before resorting to high deductibles on important coverage. "I strongly encourage people to check rates by shopping around every 6 months to a year just to be sure your car insurance company is keeping up with market rates," says Cohen. "You never want to be that person who stayed with one carrier for 15 years only to learn one day you have been paying twice what the market is charging for the past 10 years."

Online resources such as Ensurance.com and InstantCarInsurance.com can help consumers by allowing them to shop as many as 15 insurance companies at the same time. Youíll see right away whether you are getting the best price on coverage. By finding the best prices, you can set all deductibles at more affordable auto insurance rates even with increased protection. For those you want to set higher or lower, examine the potential costs of an accident versus what you are willing to pay to keep those costs at reasonable levels. The higher deductible can serve you well when it comes time to pay the monthly bills, but only if itís applied to the parts of your policy that carry a lower risk of a claim.

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