When you buy auto insurance in San Diego, you can choose the deductible amount to pay if you need to make a claim. Deductibles may be as low as $100 or as high as $1,000. The higher the deductible you choose, the lower your monthly premium. Sometimes the difference can be very dramatic, with savings of up to 40 percent. Before you jump on the savings, make sure you understand all of the benefits and drawbacks of choosing a high deductible.
Pro: A High Deductible Can Dramatically Reduce Your Premium
The best reason to choose a high car insurance deductible is the savings on your premium. Increasing your deductible from $200 to $500 could save you anywhere from 15 to 30 percent. Increasing the deductible to $1,000 could result in a 40 percent reduction. Still, you shouldn’t bet on huge savings. Depending on your vehicle, credit, and driving history, doubling your deductible might only save you $20 to $30 per year. Always check your quotes with different deductibles to see what your savings could be.
Pro: A High Deductible May Prevent You from Making Claims
Your claim frequency is an important factor used to determine your premium. If you make a claim against your auto insurance policy, it could raise your premium in the future. Some consumers purposely choose a high deductible to keep them from making claims. By paying for damage out of pocket, your insurance premiums will remain affordable.
Con: It Could Take Years for Your Savings to Equal the Cost of the Deductible
Calculate how long it will take you to save enough to equal the high deductible you have chosen, then compare it to the annual savings on your premium. For example, if switching from $250 to $500 saves you $50 on the premium, but if you need to make a claim it will take 5 years for the savings to equal the deductible. The longer it takes to recover the money you would spend in an accident, the less appealing a high deductible becomes.
Con: You May Have Difficulty Affording the Deductible in an Emergency
The point of insurance is to protect you financially in an emergency. Consider whether you can afford the deductible if you are in an accident. If your deductible is too high and you don’t have sufficient savings, you won’t be able to get your car repaired or replaced until you can come up with the money. One solution may be putting the money you save on your premium in an emergency savings fund. This approach only works if you are diligent and stay on top of savings.
Con: A High Deductible Doesn’t Make Sense for a Low-Value Vehicle
The more expensive the car, the more the car likely costs to insure. A high deductible may make sense if the car has a high value because you could save a significant amount on repairs. If your car is 10 years old and you have comprehensive coverage, a high deductible probably doesn’t make sense because it may be within a couple thousand dollars of the car’s value.
Deductibles are just one of the many things you need to consider when shopping around for auto insurance quotes. San Diego drivers who are looking for affordable and reliable car insurance should reach out to American Tri-Star. Call 619-272-2100 today for a free quote.