These days, for more than a few of us, money is tight. We’re constantly looking for ways to save a few dollars and car insurance is no exception. The truth is, for those of us who drive, insurance is not an option, but required by Texas state law, and a financial responsibility that we simply must budget for. One of the easiest ways to lower high car insurance payments is to raise your deductible- but is that the smartest thing to do? Take a few minutes and read a little about deductibles to help you make an informed decision if and when you decide to make changes to your car insurance in Texas.
What Exactly is the Deductible
All insurance policies- car, home, even life insurance- include a deductible. The deductible is an agreed upon amount that you as the policyholder are responsible for paying out-of-pocket before your insurance company will pay a claim. Deductibles vary quite a bit from very low to very high, and have a significant impact on the amount you pay monthly. Generally, the lower your deductible, the more the insurance company has to cover and therefore, the higher your rates. By contrast, when you hold a high deductible, you relieve some of the burden off the insurance company and your monthly rate decreases. Lots of consumers maintain a high deductible to keep monthly payments low and affordable.
Why Low Deductibles Can Be Dangerous
There are certainly plenty of reasons to want to lower your monthly insurance payment. And for too many of us, high monthly payments just don’t fit into our budget. But before running out and increasing your deductible to lower your payments, stop and think about how this decision may affect you in the long term. Remember, the deductible amount must be paid in full before your insurance company pays a claim. That means if you are involved in an accident with a high deductible, but cannot pay it right away- neither will your insurance provider. If you depend on a vehicle for getting to and from work or school, going without -even for a week or two- could be more financially crippling than maintaining a lower deductible with higher monthly payments.
Finding The Right Balance
The trick to choosing the right deductible amount is to find the right balance between what you can afford to pay monthly and what you can afford to pay out-of-pocket in the event you are involved in an accident. It’s not smart to assume that you will drive carefully and avoid having an accident. With almost 25 percent of Texas drivers uninsured or under-insured, you could still need to come up with deductible money even if you are not at fault. Finding the right balance will give you peace of mind that if something were to happen, you are protected. And with a family and work or school obligations, sometimes, it’s simply not worth the risk.
Deductibles are a fact of life with car insurance and every policy has one. A high deductible can alleviate some of the burden of a monthly payment, but may cause you financial hardship should you need to file a claim. Lower monthly payments are easier to deal with in the event of an accident, but may cause your monthly payment to creep up just a little too high to be comfortable. Finding the right balance between what you can afford to pay out-of-pocket and what you can afford to pay every month will give you peace of mind and help you maintain quality and reliable auto insurance in Texas.