Getting Better Car Insurance Premiums By Rethinking Your Deductibles
Car insurance premiums can be relatively high and rethinking your deductibles is probably one of the fastest and easiest ways to lower them. The deductible amount is the money for which a policyholder is responsible when a claim is made. The level of the deductible can be anywhere from zero to a thousand dollars or more and, generally speaking, higher deductibles equal lower premiums. The deductible amount is optional and is typically chosen by the policyholder when taking out the coverage.
Actually, rethinking your deductibles only applies to two portions of a car insurance policy: comprehensive coverage and collision coverage. These are the only two options in standard automobile insurance coverage where the insurance company actually shares some of the risk with the customer. When a claim is made under either the collision or comprehensive provisions of a policy, the insured driver must come up with the deductible amount before the rest of the claim is paid.
The reason insurance companies use a deductible amount for the parts of the policy that pay benefits when the covered vehicle receives physical damaged is to motivate policyholders from submitting small claims. If a car is covered by $500 deductible and a fender bender causes $700 in repair damage, the policyholder may forgo a claim just to prevent a rise in his monthly insurance premiums. The company, in the meantime, has saved itself $200.
As a rule of thumb, a realistic deductible amount for a car is the amount the owner could come up with on the spot without causing too much hardship. If the deductible is so high you can't afford to pay it in the event of a collision, it's going to cause problems in most cases. For most drivers, a $500 deductible seems about right.
Another factor to consider when figuring your deductible amounts is whether your car really warrants being protected for collision, comprehensive, either or both. If you're driving an old beater that could easily be repaired or replaced in the event of a collision, collision coverage might not be worth the money it costs. The same can be said regarding comprehensive coverage.
Cars that are being financed through some type of lending institution, however, will in most cases be required to have full coverage, including collision and comp both. This is so the interests of the bank or lending company are covered in case the vehicle against which they hold a lien is damaged, burned, totaled, stolen or any of the other perils that can sometimes befall an automobile.
Car insurance premiums depend on dozens of factors, not the least of which is the amount of the deductibles. Raising deductibles will automatically lower premiums.
