A wise man once observed, “A ship is safe in harbor, but that’s not what ships are for.” So true for life as well! To live your life fully means taking risks and possibly incurring losses. Insurance can’t prevent loss, but it can cushion the financial impact.
Buying car insurance with liability coverage is not an option in Minnesota. You do, however, have options on whether to also purchase comprehensive and collision coverage. If you do, you must also make a decision on the deductible that best suites your particular situation.
Liability insurance coverage addresses damages you cause to another. Frequently car owners also choose collision and comprehensive coverage. Both of these types cover damages to your vehicle not caused by another driver. The difference between comprehensive and collision relates to the cause of the damage.
- Collision coverage applies when your car is damaged after you hit something, e.g., another car, a tree, or an embankment.
- Comprehensive coverage applies when your car is damaged by anything other than a collision, such as a fire, hail damage. Glass claims are also fall under the comprehensive portion of a car insurance policy.
When you make a collision or comprehensive claim, the insurance company reimburses your expense, less your deductible.
Typically a lower-deductible policy has higher premiums than a higher-deductible policy because the insurer has more money at risk. If you choose a higher-deductible policy, you will save on premiums and may be money ahead if you don’t make too many claims.
Choose a Deductible, Understand the Result
Each person’s insurance needs and wants are different. Even two people living in the same area with the same make and model car may choose policies with different deductibles. When choosing a deductible for your car insurance, you should consider your chance of loss and your ability to shoulder expenses resulting from a loss.
Let’s say you swerve to avoid some debris on the road and hit a tree. The damage to your car will cost $4500 to fix so you decide to make a collision claim.
- If you have a $500-deductible policy, you will pay $500 and the insurance company will pay $4000.
- If you have a $1000-deductible policy, you will pay $1000 and the insurance company will pay $3500.
Let’s look at another example involving comprehensive coverage. Let’s say you are parked outside and find that someone has smashed your windshield. You call and find out that it will cost $1200 to replace it.
- If you have a $500-deductible policy, you will pay $500 and the insurance company will pay $700.
- If you have a $1000-deductible policy, you will pay $1000 and the insurance company will pay $200.
In both examples, the first option will have higher premiums, but you will need less money at your disposal at the time of loss to fix the car and get back on the road. If you have enough money to pay the higher $1000 deductible out of pocket, then Option B may be more economical (depending, of course, on how many other claims you have!)
When choosing a deductible, think about the likelihood of a claim. Where do you drive? How often? In all kinds of weather? On all kinds of city streets and country roads? Also consider your financial situation. Be sure you have adequate funds available to pay the deductible.
Andreotti Insurance has served residents of Oakdale and and the greater Minneapolis St. Paul metro area since 1996. Frank Andreotti knows insurance and is happy to help you find a car insurance policy with a deductible appropriate to your situation. Stop in 6230 10th St N, Ste 430 in Oakdale or call him at 651-739-9302. Then leave the harbor and enjoy life!