It is not easy to come up with the "right" amount of car insurance deductible; a low deductible leaves you with high premium while a high deductible may leave you stranded if your car does get damaged and you don't have money. However, there are a few assessments you can make to help you reach the sweet deductible pot that is neither too low nor too high. Here are some of the things you should assess.
The Size of Your Emergency Fund
Your deductible should be an amount you don't have to look for if your car is damaged; it should be something that is always in your checking account. This is because you will be required to come up with the money immediately your car is damaged, and the insurer has agreed to meet the repair cost. Therefore, if your checking account rarely exceeds $600, then there is no use carrying a $1,000 deductible because you may find it difficult to come up with the $400 difference in case of an accident; just stick to something in the range of $500.
The Level of Your Risk Exposure
Your deductible should also reflect the level of your risk; as a rule, the higher your risk exposure is, the lower your deductible should be. This makes sense if you consider the fact that a deductible is something you have to pay every time you incur a claimable damage. Imagine choosing a high deductible and then having to cough it up multiple times. You should assume that your exposure to risk is high if you drive a lot, you drive during peak times, you have a teenager in the house, or you live near a dangerous section of the road such as a busy intersection.
The Value of Your Vehicle
You should also consider lowering your deductible if you have a low-value car and raise your deductible if you have a high-value car. This makes sense because low-value cars do not cause as much to repair as high-value cars even if they incur the same damage. Consider an example of a damage that costs $2,000 to fix in a low-value car and $5,000 to fix a high-value car. If you have a high deductible for the low-value car, then your insurance coverage won't help you much because you will still be footing most of the bill.
Of course, you should also consider how much savings you can get from your auto insurance when lowering your deductible. Your agent or auto insurance carrier should help you with this information.