Changing Your Auto Insurance Deductible to Save Money
Filed under: Car Insurance News
Making simple changes to your auto insurance deductible can save money. With today’s poor economy, nearly everyone is looking for ways to spend less. There are risks involved though, so policy owners should be wary of making changes that will not be beneficial in the event of an accident. Talk to an insurance representative before making any changes to determine what changes will be best for you.
What is an Auto Insurance Deductible?
Before raising an auto insurance deductible, it is important to understand what it means. An auto insurance deductible is the out-of-pocket expense that a vehicle owner will be liable for if they get in an accident. The lower the deductible is the higher the premium will be. Deductibles usually range from $0 to $2500. If you have a $500 deductible and are involved in an accident, this means you will be liable for the $500 and the insurance company will cover any additional costs up to your policy limits.
The Benefits of Raising a Deductible
The biggest benefit of raising an auto insurance deductible is that the premium amounts will be lower by up to 10 percent. Decide how much you can afford to pay if you are involved in an accident first. Having a lower premium payment each month will do no good if there is an accident and you have a $1000 deductible you cannot afford to pay. However by having a $500 deductible, the premiums may be lower while the out-of-pocket cost may still be affordable.
Risks of Higher Deductibles
Factor in your driving record before raising an auto insurance deductible. If there is a history of claims, a higher insurance deductible may end up being more costly than the money saved on premiums. If the vehicle is bank owned still, the lending company that holds the title may also have a maximum deductible requirement. It is important to contact the lien holder before making any changes to the policy.
Deductible Requirements
Sometimes, regardless of who is at fault in an accident, the policy holder may be required to pay for the deductible. This can be reimbursed if the responsible party’s insurance agrees to reimburse the victim in an accident. However, this is not always the case, so the auto insurance deductible should be affordable. The higher risk the driver is, the higher the insurance company deductible frequently. This reduces expenses for the insurance company, letting them collect premiums while minimizing the amounts they will be required to pay out.
When You are Unable to Change Your Deductible
In addition to having to follow lending company rules, policy holders who have a blanket policy may not be able to change their deductible rates. Insurance companies can also have certain requirements on deductible rates. Classic car coverage often has a set deductible requirement. When purchasing an auto insurance policy, determine if you must comply with the deductible requests of others.
Before making any changes to a policy, make sure it is the most economical decision. Good drivers frequently go years between accidents, but an unsafe driver may find themselves paying much more than they are saving. Drivers who get in few accidents can save thousands of dollars in insurance premiums though by raising their auto insurance deductible. If you are a safe, responsible driver, find out how much you can save today.
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Posted on February 15th, 2011 by Elizabeth Martin
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