You know about your car insurance deductible? This is the amount you have to pay on an insurance claim before your insurance kicks in to pick up the repairs. Say you have a $500 deductible. You get into a fender bender and file a claim to have your bumper repaired. An estimate for the repairs is $1500. You have to pay $500 and insurance picks up the $1000. If your deductible were $1000 then you pay $1000 and insurance covers $500. Get it?
So why not make the deductible as low as possible?
Sounds reasonable. You would rather your insurance pay more and you pay less. Things is though, the lower your deductible the higher your premium is! You pay more on your plan when your deductible is low. This is the insurance company’s way of getting that extra cash layout back before an accident. The opposite is true too. The higher you make your deductible the lower your premium payments are.
It’s a trade-off between what you pay on your premium versus what you pay for repairs.
Here’s where your savings comes in – If you have adequate savings to cover a higher deductible in the event of an accident then you can raise your deductible to pay less on your premiums!
Savings=Lower Insurance Payments
Personally, I’d much rather have the savings on my premium now than save on my deductible in the event of an accident later on. A good savings plan gives you the flexibility so you can save on your car insurance.
Do you have an extra $500-$1000 in your savings that could cover repairs in case of a car accident? If you do you should really call up your insurance provider and ask how how much you can save on your premiums by raising your deductible!
And did you know – If you get into a car accident and it’s clearly another driver’s fault then the other driver’s insurance should cover your deductible. Also, some insurance providers offer deductible bonuses for not failing a claim for a certain amount of time. For example you might get a $50 deductible credit for every year you don’t have a claim. Check with your provider. These are two more reasons to raise your deductible!
But make sure you have the savings!
Don’t raise your deductible just because you want a lower payment. If you don’t have the money to cover your deducible then you can be asking for trouble if you have an accident. Imagine getting into an accident then having to come up with $1000 to get your car fixed when you don’t have the money. You might be stuck charging it or doing without your car.