How to Choose Your Car Insurance Deductible
You’re shopping around for car insurance in Canada and you’re stuck on one thing. You can’t figure out the car insurance deductible you should go with. This is a tough decision to make because this can impact your finances in a big way today and down the road.
Before we move forward, I need to remind you that you only pay the deductible amount when you make a claim and you’re found at fault. Your car insurance deductible amount is the portion of the repairs that you’ll pay for out of pocket. Insurance companies have a deductible charge because they don’t want folks filing claims for every small issue. This way, it’s more likely that your claim is worth it before you file it.
So, how do you choose your car insurance deductible?
Base it on your car
When you have a new car, you’re going to spend good money to have something repaired due to the price of parts and the fact that you want to take care of it. You won’t be too happy when you’re stuck paying the $1,000 deductible amount to fix something up. You can increase your deductible as your car gets older since you won’t be as eager to fix it up. Every car is different and the price of repairs will vary.
Think about your risk tolerance
I have friends who can’t fathom the idea of being stuck with a high car insurance deductible to cover costs in the event that something happens. What would you do if you had to spend $1,000 on car repairs? Would this totally destroy your budget? Would this cause you a ton of stress? Only you know your level of risk tolerance. I know that my parents love to play it safe. I don’t mind taking a few risks, but I’m also in my 20s.
Your budget
A higher car insurance deductible will help you save on insurance premiums throughout the year. However, I don’t know what your financial situation is like right now.
When you set your deductible high, you’re also more likely to pay for damages on your own because you don’t want to file a claim that’s going to cost you money. Would you be able to cover these damages? Could your budget handle a small repair of a few hundred dollars? Do you need to save the money upfront with lower premiums by setting a higher deductible?
You’re going to have to think about your car, risk tolerance, and your budget when deciding on your deductible. You also need to think about mandatory coverage and what is required in each province.
The whole point of getting car insurance is to protect yourself. You don’t want to be worse off because you chose the wrong insurance policy.