Many people increase their auto insurance deductible to have more affordable auto insurance premiums. By doubling your insurance deductible, you can get up to 40% off the price of your premiums.
However, this is only a good idea if you have money set aside to pay the deductible if you have caused an accident. If you cannot easily get this money, you may not be able to pay your share of the repair costs and your car may not be repaired in a timely manner. Even worse, you may be required to pay some of the damage to someone else’s property, but you are unable to do so. Many people without large cash reserves have to keep their deductible low. However, they often have to pay higher premiums for this.
Is there a way to lower your deductible while still keeping your premiums manageable?
There are several ways you can achieve this goal. Each method requires some planning and discipline, but each method can be achieved by anyone looking for a low deductible and a low premium.
First, you can choose to insure yourself with a company that offers a “vanishing deductible” program. According to these programs, your deductible decreases each year by a fixed amount that you are accident and claim free. Some of these programs allow you to lower all of your deductibles, and others can only 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 in which you gradually save the amount of your deductible and slowly increase your deductible every six months. Here’s how this would work: Suppose your current deductible is $250, the lowest your company allows. Now suppose you saved $100 per renewal period by increasing your deductible to $500. If you do that and save the money you saved on your premiums, plus your initial $250, you would have $450 in one year , almost enough to pay your new deductible. You can keep saving money so that you can gradually increase your deductible to $750 and then $1000. You can even choose to increase your deductible higher if your company allows it. As you slowly increase your deductible, your premiums will decrease, allowing you to save the money you need to pay the new, higher deductible.
You can also find a company that offers “accident forgiveness.” Accident forgiveness allows you to be “forgiven” for your first accident with no deductible if the accident does not exceed a certain amount of total cost. This is very useful to save your deductible if you have a small fender bender. You can also save money and pay for the damage yourself if the accident is very minor; this way, by not making a claim, you keep your premium lower and you don’t get unexpected price increases from your car insurance.
Other ways you can lower your deductible is to request a deductible reduction from your insurance company, which can be offset by other discounts you may qualify for. If you don’t currently take advantage of all the possible discounts, you could be cheating yourself with savings that could pay for a lower deductible.
Think carefully about all the individual deductibles that apply to your policy as a whole. If you have full coverage, including liability, extended and collision, you will likely have separate deductibles for each policy. In addition, you probably have a deductible for, for example, uninsured motorist cover. Some states set the deductible for uninsured motorists’ coverage by law; you cannot increase that deductible, even if you wanted to. In most states, however, you can pay with your collision deductible and comprehensive policies, increasing or decreasing it as you see fit.