If you are trying to save money on your car insurance premiums, you may be tempted to take a higher deductible. You are willing to take the gamble. If you don’t have to use your car insurance, you win by saving money every month. If you do have to use it, you’ll have to pay the higher deductible, which depletes the savings you made on the premiums.Get today’s insurance rates.
But why does that higher deductible save you money?
The Insurance Company’s Risk Decreases
When an insurance company has to pay less money out of their pocket, their risks decrease. They can pass on this decreased risk in the form of savings on your premium. When you take the higher deductible, you take the financial risk should something happen. It’s good to keep your deductible at a number that you can comfortably afford. Whether it’s $500, $1,000 or higher, make sure it’s a number you are comfortable paying at any time.
How Much Will You Save?
The bigger question you probably wonder is ‘just how much will you save?’ It really depends on the amount you increase your deductible. If you increase your deductible only a little, then you might not see much savings. If you increase a lot, though, you may see a significant decrease in your premium. On average, drivers save between 5% and 10% on their premiums.
Is it Worth the Risk?
Something you have to ask yourself, though, is if it’s worth the risk. Taking a deductible that you can’t afford is foolish. First, you should even see how much money you would save each month. Some increases in the deductible only save drivers $10 – $20 per month. That’s not a lot when you think about it. The savings really come into play when you have higher premiums because you have multiple cars on the same policy. If you are paying one car, your savings might not be great.
Try to keep the deductible at an amount that you know you can absolutely afford. Maybe you have the money set aside in a bank account that you don’t touch. Leave the money there. If at the end of the year you don’t have to use the money, you are in good shape.Shop and compare insurance quotes.
For example, let’s say you have a $1,000 deductible. It saved you $20 per month on your premiums. You never had to make a claim that year, so you saved the $1,000 deductible plus the $20 per month or $240. That’s a total savings of $1,240.
Other Ways to Lower Your Premiums
If you aren’t comfortable with the higher deductible, there are a few other ways that you can lower your insurance premium:
- Bundle your insurance – Get all or most of your insurance policies from one agent. For example, if you have car and homeowner’s insurance, get both policies from the same insurance company to take advantage of the bundling discount.
- Safe driver discounts – Some insurance companies provide discounts for drivers that haven’t had an accident or ticket recently (each company has a different timeline).
- Pay the full premium – If you pay your premium upfront for the six-month term, you might save a little money rather than paying it monthly.
- Take a driving course – If you have a bad driving record, take a defensive driving course. Your insurance company may reward you with a small discount.
Saving money on car insurance feels imperative. You have to have insurance in order to drive – it’s the law. But doing what you can to get the costs down, whether it’s a higher deductible or one of the other methods, you’ll save money on this necessary expense.Get the right insurance coverage.