Should You Raise Your Car Insurance Deductible?

Your car insurance deductible is the amount of money you have to pay out-of-pocket before the insurance company will begin to pay toward a claim. When you purchase your car insurance policy, you will have several options for deductible rates. Opting for a policy with a higher deductible will usually save you money on the premiums you pay, but it means that you will have to pay out a higher amount if you are in an accident or need to file a damage claim. Safe drivers who don’t expect to file claims can pay less by lowering deductibles, but the lower deductibles could be more expensive in the end.

Raising Deductibles Can Save Money in the Short Term

It is a fact that insurance policies with higher deductibles are less expensive. You might think that the rates are cut because you are covering more of the costs of a claim, but the truth is the insurance company charges you less because they believe you will be less likely to file a claim if you carry a higher deductible. Your insurance rates are based on the probability of you filing a claim. If your deductible is high, you will probably skip an insurance claim on any repairs that would cost as much as or less than the deductible. Reducing your claims volume saves the insurance company tons of cash every year.

Deductibles that are Too High can be Risky

Before you consider raising your deductible, you need to examine exactly how much money you can afford to pay out after an accident. If the deductible is more than you have in your savings account, you could be left without a car while you try to raise the money to pay for the deductible before the insurance company will begin to provide benefits. The additional cost of losing your transportation can be far more expensive than choosing a deductible that you can really afford.

Savings May not be Worth the Potential Cost

In many cases, the difference between deductible levels does not make a big difference in the price of your premiums. Depending on the type of coverage you carry and the insurance company that carries your policy, you could be looking at a savings of less than $30 if you increase your deductible by a few hundred dollars. The small return on your deductible switch is not always worth the large increase in the risk of having to pay out a substantial amount of money toward your deductible.

Look for Other Ways to Cut Insurance Rates First

Insurance companies offer several discounts that you might not be taking advantage of. Look through your policy carefully to see if you qualify for lower rates on your existing coverage. Many insurance companies offer special discounts for vehicle safety equipment, including airbags and anti-lock brakes. They also offer discounts for theft deterrent and tracking systems. Read the fine print of your policy and make sure that you are being given all of the discounts that you really qualify for. It is also a good idea to compare quotes from several different companies to see if you might save money by switching to a different insurance carrier.

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