How to Plan for Your Auto Insurance Deductible

How to Plan for Your Auto Insurance Deductible

Auto insurance shields you from some of the biggest bills that follow an accident—but not all of them. You can still expect to pay an out-of-pocket deductible, even if you’re fully insured with comprehensive and collision coverage.

Most deductibles wind up costing $1,000 or less. This might not be that much compared to the total cost of a multi-thousand-dollar accident, but it can still be a lot to handle if you weren’t expecting it.

What is a Deductible and How Does it Work?

An auto insurance deductible is the amount you have to pay before your insurance company covers the rest of the repairs and settlement. In most cases, drivers can expect to pay $500 out of pocket. However, deductibles may range anywhere between $250 and $2,500.

Where you fall on this scale is your decision. You usually get to choose your deductible when you first sign up for coverage.

Opting to pay a higher deductible may lower your monthly premiums, but it means you’ll have to cough up more money on the day of the accident. A lower deductible, on the other hand, will increase your monthly insurance rate, but it reduces what you pay for repairs.

What if Your Deductible is More Than Your Repairs?

Depending on your accident, your deductible might be worth more than the repair cost.

For example, your mechanic says it will take $400 to repair your front bumper and your deductible is $1,000. Since your insurer will only step in once your repairs exceed $1,000, your insurance company won’t pay anything in this scenario.

If you’re paying for everything out of pocket, you probably don’t have to file a claim. However, you still have to figure out how you’ll cover these repairs.

Do You Have the Cash to Pay a Deductible Today?

For most people, even a $400 repair can be too much for their budgets. Survey after survey shows Americans would have to take out a line of credit or short-term personal loan to cover an unexpected expense that size.

If a $400 unexpected repair is more than you can afford, you may apply with online direct lenders for a line of credit or loan. The website MoneyKey describes online direct lenders as financial institutions that fund your loan without the help of a loan matching service or broker.

Having a direct line to your lender (with no middlemen) can simplify your borrowing experience. You may also learn if you qualify and are approved for funds faster when you work with online direct lenders. Speed comes in handy when you need to get your car back on the road.

How to Afford Your Next Deductible?

Online direct lender loans may be the best option when you’re surprised by a deductible, but now that you know deductibles are an essential component of auto insurance, you can plan for them accordingly.

Here are some tips to help you afford your next deductible:

  • Switch to a lower deductible. You can switch your deductible from $1,000 to $500. However, these changes may increase your monthly premiums.
  • Adjust your coverage. Your insurer may offer additional coverage that lowers your deductible. Talk to an insurance agent to learn about your options.
  • Beef up your monthly savings. An unexpected collision will always be easier to handle with a well-stocked emergency fund. To make sure you have enough savings set aside, sit down with your budget to increase your monthly savings.

One day, you might have to pay an out-of-pocket deductible. Keep these tips in mind to help you afford what your insurance won’t cover.

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