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Deciding on an auto insurance provider is a personal financial choice that you should not make without first considering what level of risk you are comfortable taking or what the best options for you and your family might be. Before contacting a provider and speaking with an agent about an insurance deductible, there are several key considerations you should be making.

Know your risk factors

What risk factors do you have that may affect your chances to get a claim and how much insurance will cost? Every driver has some level of risk regardless of their experience or expertise behind the wheel. There is a range of factors which determine whether you will be offered higher or lower premiums, or even any insurance at all! Things to think about are your driving patterns (time on the road and distance regularly traveled daily), credit history (late payments or unpaid taxes), any previous accidents, geographical location (where you live), and demographic details such as age, sex, and marital status. If you spend longer periods on the road and travel long distances everyday, then your insurance premium will likely be higher. If you have a history of late payments or serious financial issues, then an insurer will see you as higher risk and offer you a higher premium. Single men tend to pay more than married couples because they are more likely to file claims. Living in the city as opposed to suburban or rural areas is also a strong determining factor in higher premium costs because your chances of having an accident are statistically higher.

Vehicle value and deductible costs

What is your vehicle valued at? A vehicle’s overall value rating is an important factor in determining what deductible is best suited for you and how much that deductible might be. Generally, the more value that your vehicle has, the more it will cost you to insure it. Most insurance agents will explain to you that paying a higher deductible on a vehicle that has a higher value rating  makes sense because in the event that you do have an accident, you will want to save as much as you can on those expensive repairs. If, however, the value-rating is lower, as it is with older vehicles, then paying a higher deductible may not necessarily be worth it. This would especially be the case if that deductible is close to that overall value of the vehicle. Let’s say you own an 8 to 10 year old car that is worth around three thousand dollars, carrying a thousand dollar deductible may not make so much sense given the overall value of the vehicle. Comprehensive coverage, which covers drivers for a range of circumstances other than accidents and collisions such as fires, severe weather damage, vandalism, and theft, with a lower deductible between $100 to $500 is probably the better fit for you.

Budget your deductible

What do your savings look like? Do you have money set aside for emergency repairs or do you have enough liquid income to cover the costs of repairs on short notice? If you have a $500 deductible it is not much use to you if you do not have that sort of money on hand to cover it if the need arises. Insurance providers will only pay the balance for the repairs to your vehicle after you have paid the deductible. For example, if you make a $1000 claim and you have a $500 deductible, you have to pay $500 before the insurance company will cover the rest. Although getting a loan may not be the best option for you, it may be your only choice if you do not have the money available to cover the deductible in the event of an accident. There are plenty of loan companies out there to choose from but you should always take the time to find the best deal, no different than when looking for an insurance provider. So when thinking about your deductible also be thinking about how much liquid cash you have in your bank account because the last thing you want to have happen is an accident that leaves you with a vehicle that you cannot afford to get fixed.

Shop around for a good deductible

What are average costs for different types of deductibles? Major banks and a number of insurance companies in Canada offer car insurance packages, many that can be bundled or combined with home insurance for better overall rates. A quick search online of your local area car insurance providers can give you a general idea of what the average price range is for different deductibles. Look at the higher premiums as well, especially if you have a good driving record, as the rates will be lower. Practicing safe and responsible driving means that you will likely not have any accidents so putting the deductible higher could save you money every month.

Should you be thinking about a vanishing deductible?

A vanishing or disappearing deductible is an optional feature that you can add to your insurance policy. Essentially a vanishing deductible rewards you for safe and responsible driving by reducing your deductible by up to 20% for each consecutive claim-free year you have. If you have no accidents or file any claims for five years then you would have no deductible to pay at all, however, there is an extra premium to be paid in order to have this feature in the first place. A vanishing deductible might be a good idea if you have a hard time maintaining the necessary liquid money in your savings to cover a $500 deductible, otherwise if you have the money already you may want to think about paying a higher premium to reduce the deductible at all.

Different types of deductibles for different types of coverage

Does it matter having different deductibles for different coverage? The short answer to this question is yes, it does matter. More importantly, how much do different types of risk matter to you? People tend to get different types of deductibles for different types of coverage and there are several reasons. Firstly, comprehensive coverage is usually a cheaper form of coverage so lots of people opt for a lower deductible, like $100. Collision coverage tends to be priced higher so people match that with a higher deductible to split the difference. Like $500 to $1000.  As well, although you may have different types of coverage for different vehicles, it is always recommended to keep the same types of deductibles for all of your vehicles so as to avoid any confusion.

Keep it simple

Finally, don’t make it too complicated, choosing the right insurance and deductible shouldn’t involve any hair pulling or stress you out too much. Knowing what your deductibles are, how they work, and what you will have to pay in the event of an accident is an important part of car ownership. By considering the factors outlined in this short article you should be able to better navigate the search for a solid provider and reasonable rate that you feel is best for you.