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Should You Increase Your Insurance Deductible to Save Money?

Should You Increase Your Insurance Deductible to Save Money

When trying to save money on car insurance, many people look at raising their deductible to make premiums lower. It is true that the higher the deductible, the lower your premiums may be but a high deductible also means your insurance covers less when you have a claim. If you are considering a raise in your deductible to lower your premium costs, there are some tips you should follow to be sure the change actually saves you money.

How Much Do You Have Saved?

If you have a significant amount of money in savings, raising your deductible to the maximum amount possible could save you a considerable amount in premium costs. For example, if the maximum deductible you can choose is $5,000 and you have more than that in a savings account, you could cover the cost of the deductible with your savings should you be involved in an accident. In addition, you can add the premium savings to the amount you set aside each month to grow your savings account faster.

How Much Will You Actually Save in Premiums?

The next thing to look at is how much you will actually save in premiums. Is it worth saving $30 per year if you will need to come up with $1,000 should you be involved n an accident? In most cases, the higher your premium, the more you will save if you increase your deductible. You also need to determine if you are in a financial position to handle the higher deductible. If you would be unable to pay the deductible, saving a few dollars a month in premiums would not be beneficial.

How Often Do You File Claims?

If you rarely ever file insurance claims, you may be able to afford a higher deductible should something happen. Raising your deductible may result in additional savings because, for every year you don’t make a claim, the saved premiums can go in your pocket. If you have made several claims, your premiums may be fairly high. Consider negotiating the deductible with your insurance rate to get the best discount on your premiums.

Higher Deductible Discounts

Although every policy and insurance company are different, the average savings you can see when you raise your deductible is between 5 and 10 percent. The higher you raise the deductible, the more you save. With some policies, if you raise your deductible from $200 to $500 just on collision and comprehensive, you could save as much as 30 percent and if you raise it to $1,000, you could save as much as 40 percent.

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