The One Number You Must Commit to Memory When Buying Auto Insurance

This is a detail you can’t ignore.

If you are going to be driving around town, you will need auto insurance. If you are caught driving without insurance, you could face fines and even suspension of your license.

But avoiding that fate isn’t the only reason to buy auto insurance. So should you want to to have cover if you get into an accident or your car is damaged.

Let’s say your car was hit and the repair costs $7,000. That’s an amount you probably can’t afford.

With auto insurance, you don’t have to pay that $7,000. You simply pay your deductible and ask your auto insurance company to take care of the rest.

But it’s important to know what your reduction will look like. And it’s just as important to make sure that you have enough money in your savings account to pay your deduction at any given time.

You don’t want to end up in a traffic jam

The average auto insurance deduction is $500, according to American Family Insurance. Your number may be the same, or slightly higher or lower.

When you make a claim against your auto insurance policy, you usually have to pay your deductible up front when your vehicle is undergoing repairs. Then, your insurance company will usually take the remaining tab.

That’s why you should know what your deductible is and, ideally, have that kind of money in the bank. If you’re stuck having to pay your $500 deductible and your savings account is empty, you may be racking up debt while repairing your car, even with insurance in place.

It’s also important to know your deductible so you can determine whether it pays to file a claim through your auto insurance company. Let’s say you have a $500 deductible and your car has $475 worth of damage. In this case, it doesn’t make sense to file a claim, because the amount you’re liable for — $500 — will exceed the total cost of your bill.

Also, the more claims you make against your auto insurance policy, the more expensive it will cost over time. So let’s say you have a $500 deductible and you see a $600 repair bill. It may be worth paying the extra $100 if it keeps your policy costs down.

How to lower your car insurance deductible

You may not like the idea of ​​having to pay a large amount of money every time your car is damaged and you need to pay your deductible. You can ask your auto insurance company to lower your deductible. But usually, what will happen in that situation is your premium costs will go up. And overall, you may not get ahead financially.

Your deductible is something you only have to pay for if your car is damaged or if you get into an accident. But you have to pay your auto insurance premium even if you don’t make a claim against your policy. Often, it pays to err on the side of higher and lower deductible premiums, because that is a given cost.