So often, people raise their eyebrows when we suggest they increase their auto insurance deductible. That’s because typically, a low deductible would be more desirable. You pay the premium so that in the event of a collision or damage, you don’t have to drain your savings to pay for the repairs, right? Not always.
Surprisingly, there are some instances where it can make a lot of sense to increase your auto insurance deductible. Let’s look more carefully at what those instances are to see if you might want to consider raising your deductible too.
Increase Your Auto Insurance Deductible to Save Money
Probably the most common reason drivers opt to raise their auto insurance deductible is to save money. The lower your deductible is, the higher your monthly premiums typically are. That means, with a low deductible, you’re more likely to pay more to your insurance company on a regular basis. It makes sense why, too. The insurance company’s risk is higher because they’re more likely to have to pay out more in the event of a collision or damage-causing event.
Increase Your Deductible if You Want to Mitigate Losses
If you’re in a position where you can pay for damages up to $1,000, it may make sense for you to increase your deductible to save money on your premium.
For example, if you have a small fender bender, the cost to repair your damages might be $500. If your deductible is $250, then the insurance company would only kick in to cover the additional $250. Filing a claim with your insurance to cover the $250 above your deductible might not be the best idea. That claim has the potential to cause your premium to increase, which could be more costly over the long term.
With a higher deductible, you typically will pay a lower premium. In addition, you can protect your loss history, by paying for smaller claims directly and not turning in a claim. This will help to keep your premiums lower over the long term.
Increase Your Deductible After a Life Event
In some cases, raising your deductible might not be a decision based on finances alone. It might be a decision based on what’s happening in your life at the moment.
Buying a new car. When you buy a new car, you might want to adjust your deductible. More expensive cars can come with higher premiums because they cost more to repair. Having a higher deductible means you can self-insure to a point and reduce how much your premium increases.
Likewise, if you buy an older car that’s less expensive, it might make sense to raise your deductible. Older cars can cost less to repair, which can help you save money in the event of a loss. You may decide to pay a smaller claim out of pocket. This will keep your claim history cleaner and in the long run, keep your premiums lower. Some people decide to remove comprehensive and collision coverage on older vehicles and simply pay for any damage to their vehicles in an accident.
Adding a driver. Many parents opt to increase their deductible when they add on a young driver to their policy. Young drivers often increase premiums simply because their inexperience puts them at a higher risk on the road. In addition, because younger drivers often cause fender benders, you might want to consider self-insuring for minor damages rather than adding smaller claims to your account’s history.
What’s Right for You?
There are many factors to consider when choosing your auto insurance deductible. In order to navigate the process and find the right choices for your unique situation, it’s a good idea to discuss with an insurance agent. As an independent agency, we work with a variety of insurance companies and can help you find a policy that’s right for your family. Contact us today to request a proposal or discuss your auto insurance needs.
