How Can I Choose The Right Car Insurance Deductible?
Got A Financial Question?
Actually, there is no right answer here. Everyone has their own unique situation and variables to consider. We’ll look at a couple of things you should consider before taking out that super high deductible car insurance policy to “save yourself money.”
Some of the most common personal finance advice that you’ll run across suggests that you should take out the highest deductible possible that save yourself money every month. Well, I decided to take my own information and run some numbers. I looked at the difference on car insurance with a $50 deductible, $250 deductible, and a $500 deductible on both comprehensive and collision. You can check out the details in a post I created here: Does High Deductible Car or Home Insurance Actually Save Money?
What did I find? Going from a $50 deductible to a $250 deductible, I’d have to go ~4.8 years without a claim to break even. This means that if I had an accident where I was at fault more than once every 4.8 years I’d actually be better off just going with the $50 and paying the higher premium. Well, I believe I could probably make it 5 years without an accident just based on my history, so $250 it is! Now, should I press my luck and go for the $500 deductible to save even more?
When running the numbers, going from a $50 to a $500 deductible, I’d have to go 14 years without a collision claim. Well, there’s just about no way we could do that. So, this means that over the long run, we’d probably lose money by going with the highest collision deductible.
I’d encourage you to run the numbers for yourself to see where it comes out. I found the sweet spot to be around $250 for our family’s needs with the $500 or $1,000 to be completely out of the question, but your prices may show something different. This is a real case where doing a little bit of homework can really make sure you are penny wise and pound foolish!
Good luck car insurance shopping!!!