Auto insurance is one of those costs of owning a car that everyone wants to save money on, spending less on fuel is another. Yet, while there's often little you can do about the price of fuel (although a gas rewards credit card is one way to save), the price of auto insurance can often be mitigated by shopping around. It's the only way to know for certain that you're getting the best deal on auto insurance.
Another way to lower your premium, however, is by raising the deductibles you've chosen for your collision or comprehensive coverage. Increasing your deductibles could save you in the neighbourhood of five to 10 percent off your auto insurance premiums.
Making the difference with deductibles: How it works
A deductible is the portion of an insurance claim you agree to pay. Your insurance company picks up the rest. By agreeing to take on more financial responsibility should you need to submit a claim, the insurance company will adjust your premiums accordingly. In other words, the higher the deductible you choose, the lower your auto insurance rate. However, it's important that you set your deductibles to an amount that you can comfortably afford.
When is it the right time to increase your car insurance deductible?
Often people select lower deductibles, so their out-of-pocket expenses are minimal at the time of a claim. Drivers often plan for the worst case "what if" scenario. But, if you've been fortunate to have never submitted a claim or have rarely needed to, and you can afford the deductible you ultimately choose, a higher deductible may help lower your annual premiums.
Tip: Look at your rainy day fund, before choosing your deductible. If your rainy day fund is healthy, then a higher deductible might make sense. You can draw on it in the event that you need to make a claim. But, if your rainy day fund is still in its growth stage, then having a higher deductible may be financially stressful. Paying a deductible after submitting a claim shouldn't cause you to you lose sleep at night.
You may have more than one deductible as part of your policy
Often, drivers think collision and comprehensive coverage are one; but, they're actually two different car insurance coverage options.
Collision coverage offers protection if your car is damaged in an auto accident, while comprehensive coverage offers protection for non-accident related claims (theft and vandalism are two common examples.) Both coverages—collision and comprehensive—have their own deductible and these deductibles do not have match. You can increase just the collision deductible, just the comprehensive deductible, or both, depending on what you think works best for you and your comfort level.
How much could raising your car insurance deductibles save you on insurance?
If your deductible is set to $500 or lower, increasing your deductible (or deductibles) could reduce your auto insurance costs by five to 10 percent. It's an option that shouldn't be overlooked when seeking ways to keep your car insurance costs under control.
