Save Money on Car Insurance with Deductibles
Setting a High Deductible to Lower Auto Insurance Rates
Oct 17, 2009
Before a client's insurance agency issues money following an accident, the client will have to first post his or her deductible. The deductible is the sum of money that a client is responsible for when insurance coverage is required in situations, which is a set value, made by drivers. Drivers who have low deductibles will save money at the time of accidents, but monthly rates will be higher.
However, when clients set high deductibles, their insurance premiums generally decrease, because insurance agencies are less responsible for payments following accidents or incidents, saving them money. There are other actions that lower rates that should be considered for some drivers as well, such as dropping collision coverage and comprehensive coverage.
Advantages and Disadvantages of Low deductibles
As someone's deductible is the amount of money that he or she issues out of pocket before insurance kicks in following claims, a low deductible has a certain advantage: the insurance agency provides more money following accidents or claims than it would when someone has a high deductible, and the driver pays less.
For instance, when someone has a $400 deductible, following an accident that requires $4,000 in reparations, the agency will provide $3,600 after the client posts the deductible. And if someone has an $800 deductible, the agency would issue only $3,200 after the client paid the deductible. Clients are able to set their own deductible rates, and if low deductibles sound too good to be true, they certainly are, as low deductibles mean higher insurance premiums.
Save Money on Car Insurance with a High Deductible
Setting a high deductible is one sure way to lower car insurance rates. Because less money will be issued out by the insurance company following a claim when someone raises his or her deductible, the insurance company will usually lower car insurance premiums. For people who have decent driving records, and do not anticipate being involved in many accidents, raising deductibles will likely save money over time, as monthly rates will be lower.
Impacts of Raising the Deductible for Auto Insurance
If someone raises his or her deductible, money will be saved on car insurance more often than not. Supposing that someone has a $400 deductible, and he or she raises that to $800, which also causes premiums to drop by $20 per month (in this fictional scenario, which exhibits auto insurance patterns), then after twenty months without an accident, $400 is saved, which would cover the difference in the deductible, should an accident occur.
However, in that same scenario, if the driver is involved in several accidents, the money saved on rates (which would likely rise because of the accidents anyway) would not pay for the jump in the deductible. But raising deductibles does lower premium rates, so avoiding accidents is an important part of saving money overall.
There are always certain scenarios that affect what techniques save money on car insurance, but for the most part, drivers who have confidence usually save money on auto insurance with high deductibles. For confident drivers with high valued cars, it may be well worth raising the deductible significantly, as a lot of money may be saved by drivers who maintain good records and remain accident free. Insurance company agents are there to point out the best policies for certain individuals, so talking with agents about this is certainly a good idea.
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