Low Premium vs. Low Deductible: Which is More Important?
When buying car insurance, like any kind of deductible and premium, there are two things you really want to keep in mind when trying to decide on your coverage. Many people make the mistake of concerning themselves only with the monthly payment required to maintain the policy - otherwise known as the premium. Keeping that low, they reason, is all that matters to keep them covered - that is, of course, until a minor accident or scrape costs $958 to repair and they learn that their plan has a $1,000 deductible. So what is the best option overall? Low premium or low deductible?
Are you Prepared For an Emergency?
The answer to this question depends largely on your earning potential and whether you are the rare American who keeps a decent savings around for emergencies. Consider an affordable premium on your plans, just one of the many reasons to keep an emergency fund stashed away in a bank account. Even if you don’t make a lot of money, having $1,000 or more in savings for emergencies that may pop up from time to time will enable you to choose a low-premium, high-deductible policy for your auto coverage. This way you can rest easy knowing that for minor repairs, your emergency fund can handle it, and those major repairs will be covered by your insurance after the deductible is paid by your emergency fund.
Otherwise, if you find yourself living paycheck to paycheck without an emergency fund and no plan or ability to get one anytime soon, you want to be careful when shopping for an auto policy to make sure you choose a plan with a low enough deductible that you know can come up with it in a short period of time to effect any repairs that may be needed for your vehicle or other damaged property in an accident. It will raise the price of your premiums a significant amount and take a greater monthly toll on you, but it’s worth it as opposed to choosing a plan with a high deductible you wouldn’t be able to afford and finding yourself unable to pay for needed repairs after an accident.