What is my ideal insurance deductible?

What is my ideal insurance deductible?

The risk/reward ratio is ubiquitous in our lives. Be it something mundane like an approach shot on a golf course, or something intrinsically tied to our well-being like an investment decision made when we're younger. Car insurance is no different, and the gravity of this particular risk/reward decision falls somewhere between a 250-yard carry over water and a 401k. More specifically, the amount of deductible on an auto insurance policy is profoundly connected to overall cost.

Picking a higher deductible can save you a lot of money.

The difference in price from a policy with a minuscule $100 deductible to a gargantuan $2,000 will affect annual fees by as much as 25%. These are outside figures—most deductibles hover around $500. One important thing to keep in mind is that your deductible doesn't apply to liability coverage. This means that if you're involved in an at-fault accident and have adequate insurance, your policy will always take car of any damage you caused, deductible notwithstanding. Your deductible is only applicable to repairs and replacement cost on your vehicle.

Important Questions

Think about all of the following before making a decision: How much cash do I generally have available? How much credit do I have if I need to access it? What's my level of disposable monthly income? What is my car worth? Confidence that you won't get into a wreck is worth mentioning, but they're called "accidents" for a reason. Even if you doubt you'll wreck your car, you always need to be in a position where you could pony up funds for a deductible if your car needs expensive repairs. Bottom line: Carry as high of a deductible as you can possibly afford, but don't assume you'll never have to pay it.