One of the most important purchases you will ever make in your lifetime is your auto insurance coverage. Whenever you are shopping around for auto insurance fresno, one of the key considerations is determining the right amount for your deductible. Although this may not seem that significant, the amount of your deductible can have an impact on the amount of your insurance premiums. So it helps to understand all you can about deductibles before deciding on the amount of it. Deductible Defined The amount of money that you must pay out-of-pocket to have your vehicle repaired after it has been damaged in an accident is known as your auto insurance “deductible.” Since liability coverage pays for any damages that you have caused to another person’s vehicle and not your own, your deductible applies to your collision and comprehensive coverage. Those two coverages typically pay for any damages to your vehicle in the event of an accident, natural or weather-related disasters, theft, or vandalism. The two primary elements or factors of any auto insurance policy are the amounts of your deductible and your coverage limits. These factors help to determine the amount of your premium and your level of protection, both of which are expressed in dollars. Most auto insurance experts will tell you that there are 3 factors that help you determine your coverage and deductible amounts. This includes your budget, your lifestyle, and the state’s auto insurance requirements. Impact on Premium Rates You’re probably asking yourself “how does the amount of my deductible affect my premium rates?” Basically, the higher your deductible amount, the more you will have to pay out-of-pocket before your insurance company pays for the balance of your auto repairs. However, the amount of your premium will be lower. On the other hand, if you choose the lowest deductible amount, you will pay less out-of-pocket before your insurance company covers the balance of your repair costs. Consequently, you will pay a much higher premium rate. From the insurance company’s standpoint, when you choose a lower deductible, it increases their risk of having to pay more for the costs of your auto repairs. So they charge you a higher premium rate in order to compensate over the long term for the potential of having to pay out more to cover the costs of your repairs. Conversely, they are assuming less risk when you pay a higher deductible amount so they reward you by lowering your premium rates. In a sense, it’s just like a punishment/reward system. How to Choose Your Deductible Amount The important thing to remember when choosing your deductible amount is that you want a dollar amount that you and your budget can live with. Some insurance agents and brokers will tell you that even if you can afford a higher deductible amount you may want to opt for a lower one. That may just be a ploy to get you to pay a higher premium. However, the better agents and brokers out there will have your best interests in mind – or at least they should. In many cases, it is just too difficult financially for them to pay a higher amount. Should you be involved in an accident and your vehicle is damaged, will the amount of your deductible create an undue amount of financial stress for you and your family? The answer to that question could factor into determining the amount of your deductible. There are certain factors that should enter into the decision-making process such as living in a more congested area where auto accidents occur frequently or lowering your premium rates. But there are other factors to consider as well. Claim frequency will always have an impact on your premium rates. In fact, the majority of the auto insurance companies out there today will use this factor against you in order to charge you a higher premium rate. As a result, some consumers use the threat of having to pay a larger amount to their advantage and deliberately choose the highest deductible amount to deter them from making unnecessary claims. Just keep in mind that choosing the amount of your deductible depends on your level of risk tolerance. Fortunately, the math involved in calculating your savings over the long run is much simpler. Contact Central Auto Insurance by dialing 559-275-9911 to compare insurance rates and get more information.
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