The One Number You Must Commit to Memory When Buying Auto Insurance

It's a detail you can't gloss over.

If you're going to drive a vehicle around town, you need auto insurance. If you're caught driving without insurance, you could face fines and even a license suspension.

But avoiding that fate isn't the only reason to buy auto insurance. You should also want to have coverage in case you get into an accident or your car sustains damage.

Let's say your car gets hit and the resulting repair comes with a $7,000 price tag. That's a sum you probably can't afford.

With auto insurance, you wouldn't need to pay that $7,000. You'd simply pay your deductible and have your auto insurance company take care of the rest.

But it's important to have a handle on what your deductible looks like. And it's equally important to make sure that you have enough money in your savings account to pay your deductible at any given point in time.

You don't want to end up in a jam

The average car insurance deductible is $500, according to American Family Insurance. Yours might be the same amount, or a bit higher or lower.

When you file a claim against your auto insurance policy, you'll generally need to pay your deductible upfront as your vehicle undergoes repairs. Then, your insurance company will commonly pick up the remaining tab.

That's why you must know what your deductible is and, ideally, have that much money in the bank. If you're stuck having to pay a $500 deductible and your savings account is empty, you might rack up debt in the course of getting your car fixed, even with insurance in place.

It's also important to know your deductible so you can determine whether it pays to file a claim through your auto insurance company. Let's say you have a $500 deductible and your car sustains $475 worth of damage. In that case, it wouldn't make sense to file a claim, because the amount you'd be responsible for -- $500 -- would exceed the total cost of your bill.

Also, the more claims you file against your auto insurance policy, the more expensive it might become over time. So let's say you have a $500 deductible and you're looking at a repair bill of $600. It may be worth it to pay the extra $100 if doing so keeps the cost of your policy down.

How to lower your car insurance deductible

You may not like the idea of having to fork over a large sum of money every time your car sustains damage and you need to pay your deductible. It's possible to ask your auto insurer to lower your deductible. But usually, what'll happen in that situation is that your premium costs will rise. And all told, you may not come out ahead financially.

Your deductible is something you're only going to have to pay if your car is damaged or if you get into an accident. But you're going to have to pay your auto insurance premiums even if you don't end up filing a claim against your policy. So often, it pays to err on the side of a higher deductible and lower premiums, since those are a given expense.