Many people raise their auto insurance deductibles in order to have more affordable auto insurance premiums. By doubling your insurance deductibles, you can reduce the price of your premiums by up to 40%.
However, this is only a good idea if you have money saved to pay the deductible if you are in an at-fault accident. If you can’t easily access this money, you may not be able to pay your share of the repair bills and your car may not get fixed in a timely manner. Worse still, you could be obligated to pay a portion of the damage to someone else’s property and not be able to do so. Many people without large cash reserves must keep their deductibles low. However, to do this, they often have to pay higher premiums.
Is there a way to lower your deductible and still keep your premiums manageable?
There are several ways to achieve this goal. Each method requires some planning and discipline, but anyone looking for a low deductible and low premium can achieve them.
First, you may choose to insure with a company that offers a “vanishing deductible” program. Under these programs, your deductible decreases by a set amount each year that you are accident-free and claim-free. Some of these programs allow you to lower all of your deductibles, and some only allow you to lower your collision or liability deductible. Different companies offer different amounts for the deduction and at different rates. You can compare programs to find one that works well for you.
Another option is to create a plan where you gradually save your deductible amount while slowly increasing your deductible every six months. Here’s how this would work: Assume your current deductible is $250, the lowest your company allows. Now suppose you would save $100 per renewal term by increasing your deductible to $500. If you do that and save the money you saved on your premiums, plus your initial $250, you’d have $450 in a year, almost enough to pay your new deductible. You can continue to save money so that you can gradually increase your deductible to $750 and then to $1,000. You can even choose to raise your deductible higher than this if your company allows you to do so. As your deductible slowly increases, your premiums will decrease, saving you the money you’ll need to pay the new, higher deductible.
You can also find a company that offers “accident forgiveness.” With accident forgiveness, you can be “forgiven” for your first accident with no deductible if the accident does not exceed a certain dollar amount in total cost. This is very useful to save your deductible fund if you have a minor accident. You can also save money and pay the damages yourself if the accident is very minor; This way, by not making a claim, you keep your premiums lower and you don’t have unexpected increases in the price of your car insurance.
Other ways you can lower your deductible are to request a deductible reduction with your insurance company, which can be balanced by other discounts you may be eligible for. If you’re not currently taking advantage of all possible discounts, you may be cheating yourself out of savings that could pay for a lower deductible.
Be sure to consider all of the separate deductibles that apply to your policy as a whole. If you have comprehensive coverage, which includes liability, comprehensive, and collision, you probably have separate deductibles for each policy. Plus, you’ll likely have a deductible for things like uninsured motorist coverage. Some states set by law the deductible for uninsured motorist coverage; you can’t increase that deductible even if you want to. However, most states allow you to pay with the deductibles on your comprehensive and collision policies, increasing or decreasing them as you see fit.