Another effective money-saving strategy is to raise your deductible to lower your insurance premiums. Raising your deductible does not necessarily cost you more money up-front. Conversely, this strategy reduces the amount of money you have to pay each month and/or annually. How does raising your deductible get you a lower car insurance rate on your premium?
An insurance deductible is the amount of money you are required to pay out-of-pocket before your insurance company begins to pay for your claim. Auto insurance deductibles range approximately from $0 to $1,500 or more. Insurance policies with $0 deductibles usually charge premium rates significantly higher than the national average.
How exactly does your deductible work? Consider for example you have a $1,500 deductible. An accident causing $750 to your car results in you paying the entire $750 out-of-pocket. An accident causing $3,000 damage to your car results in you paying $1,500 out of pocket and your insurance company paying the other $1,500.
Raising your deductible to lower your insurance premiums is betting on yourself not having any accidents. The strategy is designed to save you money each month and all year long, provided no accidents occur. Do you have enough money in savings to pay for out-of-pockets damages to your vehicle?
The value of this strategy depends on a few other considerations as well.
The amount you pay for your insurance affects the value of increasing your deductible as a money-saving strategy. If raising your deductible only saves you minimal money each year it might not be worth making the change.
This is especially true when a higher deductible leaves you responsible for higher accident-based expenses you are unable to afford.
Understanding how much money raising your deductible saves you is a priority consideration. It is also important to consider how often you make insurance claims. If raising your deductible saves you $100 each year and you make no claims for ten years, the strategy saves you $1,000.
If you have one accident in those same ten years, however, your entire savings might be fully negated.
Raising your deductible might save your five to ten percent each year on your insurance premiums. The higher you raise your deductible the more you save on premium costs.
Raising your deductible from $200 to $1,000 on your collision and comprehensive coverage might save you forty percent on your premiums each year. It is possible to save multiple thousands of dollars using this strategy if you are also a safe driver and file no claims while your deductible is raised.