CAR INSURANCE DEDUCTIBLES: THE GOOD, THE BAD AND THE UGLY

CAR INSURANCE DEDUCTIBLES: THE GOOD, THE BAD AND THE UGLY

By: Eric M. Doroshow

September 29, 2008

If you are looking to save premiums on your car insurance, a deductible can be a good idea. A deductible means money coming out of your pocket, so be careful and look closely at the insurance benefits you will have.

Choosing a deductible of $500.00 can save you a significant amount of premium in the collision coverage on your car. So choosing a deductible here may make real sense.

However, recently insurance companies have been suggesting deductibles for PIP coverage (Personal Injury Protection). These benefits are shared between you for the payment of lost wages and your healthcare providers for payment of medical bills. The minimum limits to drive are $15,000 in PIP.

We have seen our clients choose very high deductibles in PIP; $2,000, $3,000, sometimes as much as $15,000. We STRONGLY suggest to our clients not to purchase these deductibles. Why?

If you do have a deductible, the company will apply it against your medical bills balance. So you will be responsible to pay for that bill out of your own pocket. If you have a viable 3rd party case (personal injury case against someone at fault), that unpaid deductible portion would come out of your settlement. And if you don’t have a viable case, you may find yourself reaching into your own pocket to pay this bill. It’s simply not worth it.

An especially egregious problem occurs with motorcycle insurance. Many companies offer to cut their premiums for large deductibles. Unless you have excellent health care benefits and long term disability insurance from other sources, don’t take the deductibles.

In summary, the advice here is to be very careful before you choose a deductible on your car insurance. Know exactly what your premium savings is and whether or not it makes any sense. For more information about your legal rights and car insurance, feel free to contact us.