Car Insurance: Increasing Your Deductible Is Not Always The Best Solution!

By • Aug 17th, 2012 • Category: Insurance

If you are wondering how you will finance your car insurance premiums when your cost of living increases, there is hope in varying your deductible upwards. The car insurance deductible is the amount or percentage you pay in case of an accident, before your insurer releases any money. The following are the reasons that support the argument for an increase in your deductible.

1.       When you have a high deductible, you file fewer claims

High deductibles work psychologically to prevent you from having many claims to your insurer. This happens because, the higher the number of your claims, the more money you will pay out of your pocket. Remember, the insurer waits for you to honor your part of the deductible for them to match it. Thus, it is only viable for a person with a very careful driving practice, to raise their deductibles.

Insurers love it when you raise your deductible because they know they will have fewer claims. Their business hinges on predicting the number of claims one is likely to make, and matching that with the premium charged on the person.

2.       The increase in premium may not be worth the increase in deductibles

When you are choosing the option of deductibles as a way of reducing your premium, you could also be exposing yourself to a higher payment risk, in case you have to make a claim within the year. For example, you can save $300 in your premium annually after increasing your deductibles by $400. The $300 dollars in savings appears to be worth it.

Nonetheless, if you have to make a claim, then you will be paying $400 out of your pocket. The extra $100 will come from your wallet. Moreover, you may not already have the $300 you saved in that year as cash. It is advisable to hold the cash saved in premiums as another form of emergency fund.

The saving on premiums prompted by a raise in your deductibles is not always instant. They may also not remotely match the increase in your deductible. For example, after calculation, you may find that you need to remain claim-fee for even a decade for you to recoup the increased risk you take.

Sometimes, after a cost and benefit analysis, one finds it is appropriate to pay the current premium rates.

3.       There could be other options available that are less risky and have instant benefits

Insurance policy has a lot of information hidden in their fine print. You must always find out what your car insurance covers. Often the cover extends beyond the basic limits agreed upon during the purchase of the policy. For example, the fine print could indicate that you are to receive credit for having safety and recovery features in your car. Thus, if you have a GPS system, you could qualify for a discount in your premiums. The GPS allows your car to be traceable when it is stolen. Therefore, before jumping for an increase in deductibles on your car insurance, make sure you have exploited all other options.

Hi, I am Kat Edwards and I write guest blogs on car maintenance tips. I choose Car Insurance Hero for my car which provides me with perfect guide to car insurance comparison.

 Car Insurance: Increasing Your Deductible Is Not Always The Best Solution!
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