Your deductible should be $250 when you live paycheck-to-paycheck; $500 when you don't have much money saved up; and $1,000 when you're living comfortably.
$250 Deductible: When you live paycheck-to-paycheck and don’t have much savings
When you choose a $250 deductible, your out-of-pocket costs stop at $250 after a loss that requires an insurance claim.
Your insurance company covers your loss, minus the $250 that represents your deductible.
Choosing a $250 deductible works for people who have little or no money left at the end of a month, and whose bank accounts aren’t as large as they’d like.
The trade-off of a smaller-sized deductible: higher monthly premiums.
An insurance plan with a $250 deductible may cost 20 percent more as compared to a larger-deductible plan. So, if you can afford to pay more than $250 out-of-pocket after an accident or a loss, choose a higher deductible amount.
Otherwise, the $250 deductible works great.
$500 Deductible: When you’re getting by, and have some money saved up
When you choose your insurance company’s $500 deductible option, your insurance company caps your out-of-pocket costs to repair, replace, or remedy at $500.
Your insurance company pays for damages in full, minus your $500 deductible.
Choosing a $500 deductible is good for people who are getting by and have at least some money in the bank – either sitting in an emergency fund or saved up for something else.
The benefit of choosing a higher deductible is that your insurance policy costs less.
So, if you feel good about your cash savings and can reasonably make $500 payment after an accident or loss, choose the the $500 deductible.
$1,000 Deductible: When you’re living comfortably, and feel good about your savings
Choosing the $1,000 deductible option limits your out-of-pocket costs after an insurance claim to $1,000. Your insurance company pays all of your damages – minus your $1,000 deductible.
The $1,000 deductible is good for people who earn a healthy income and who have sufficient savings to handle unexpected events, such as car accidents, damages to the home, and the theft of valuables.
Choosing a $1,000 deductible lowers your policy costs considerably. High-deductible insurance costs at least 20 percent less when compared to low-deductible policies.
Just make sure you have at least $1,000 available in savings at all time.