As you are searching for ways to cut your auto insurance costs, you might come across an option that tells you to raise your deductibles. This is often one of the highly recommended ways to save money on auto insurance, but does it really help? If you raise your deductibles, will you see a difference in your premiums? The answer is yes, and here are a few things to know about the correlation between deductibles and premiums.
Why Deductible Matters
The first thing to know is why the deductible amount matters so much, and it might be easiest to understand by viewing an example. Say that you were in an accident that you caused that resulted in $2,500 of damage to your car. If you had collision coverage, you would pay your deductible first and the insurance would pay the rest.
- If your deductible was $500, the insurance company would have to pay $2,000.
- If your deductible was $1,000, the insurance company would pay $1,500.
- If your deductible was $1,500, the insurance company would pay only $1,000.
As you can see, when your deductible is low, the insurance company has to pay more than they would if you had a higher deductible. This is why insurance rates factor in the amount of a person's deductible.
The Effects of Raising Your Deductible on Premium Costs
Now that you understand why deductibles matter to insurance companies when determining rates, you might be wondering how much you can save. According to one source, you might be able to save up to 40% if you switch from a $500 deductible to one that is $1,000. You may have to change the deductible amount for both your collision coverage and comprehensive coverage, but it might be worthwhile to do this. However, be sure you have the money to pay the deductible amount, should the need arise.
Other Tips to Save Money
In addition to saving money in this way, the other best way to save money on your auto insurance is by taking advantage of discounts. Most insurance companies offer a lot of different discounts, and you might have to ask about them, but if you can qualify for any of them, you will save even more money on your policy. Therefore, it is worth asking an agent about the discounts they offer.
Talking to an auto insurance agent about other ways to save money can be quite helpful, too. If you would like to do this, simply call an agency today.