It’s not rocket science, but on the other hand, it’s also not something many of us think about when trying to find areas to save money. It’s one of the easiest ways to effectively save money. Making changes or adjustments to your auto insurance deductibles could provide a few extra bucks in your pocket depending on the type of coverage you need. Deductibles, simply put, is the amount of out-of-pocket money you are liable to fork over before your trusty insurance company steps in to shell out its portion. Insurance companies have deductible tiers in place that you can choose from, but it is equally important that you understand them and are able to orchestrate a set of smart deductibles yourself and according to your unique circumstances.
Not all agents or agencies for that matter will take the time to explain how each option will affect you, so there is a little legwork involved; that is unless you want to take a wild stab in the dark and choose based on what you think rather than what you’ve learned by spending a little time to familiarize yourself with the basics.
When properly prepared and have the right tools in your kit, you can ensure you accurately set the right deductibles to protect you from large losses for a comfortable insurance premium. It is common for most people to select a deductible based on how the monthly premiums are presented. Often times, higher deductibles seem attractive mainly because they come with reasonably lower premiums, which means more manageable monthly payments.
Cost is definitely a critical factor to consider when shopping around and determining which set of deductibles is best for you; follow along for an in-depth look at deductibles and how your decision makes a difference in the long run.
The Elementary Principles of Insurance Deductibles
Little do you know, you’re in total control of the amount of auto insurance you choose to carry. Unfortunately, you electing to have no insurance at all is not possible. State laws govern the level of insurance you are required to carry and set minimum amounts of liability required in order for your vehicle to be considered road legal. On the other hand, if you’ve borrowed money or took out a loan through a financing company to buy your car, their stipulations may be different than the State minimum. Some lenders, banks, credit union or otherwise noted lien holder could ask that you keep your automobile under full coverage while you are paying off the debt.
If the thought of using insurance makes you feel eerie, consider insurance protection as a tool in your kit. It provides you with peace of mind and can protect your assets in the midst of turmoil or disaster. Sure, everyone has a different set of values or ideas of exactly how much insurance protection they may or may not need or how much they are willing to risk for cheaper premiums. Those who deter from normal risks will typically opt for a higher premium, with a lower deductible. In opposition, those do not scare easy from risks will choose to have a higher deductible, in order to benefit from lower monthly premium rates.
You can also consider your monthly payments as a risk factor. The amount you give your insurance agency every month is a direct correlation to the amount of risk you yourself are willing to endure versus what you expect them to cover. It’s not easy to figure all of these decisions when you’re sitting in front of your agent discussing paperwork and signing insurance policies.
Also, the saying goes: More money. More problems. This can translate into insurance coverage. The more you have to lose, the more insurance protection you are going to need. That’s simple logic.
Understanding Types of Auto Coverage and Their Offered Deductibles
When you look at your insurance policy, you’ll see several types of auto coverage. Comprehensive and collision are among the most common types of coverage with deductibles along with physical damage. Your automobile itself is covered and damages are paid for no matter who is considered at fault. Depending on your policy drawn up by your agent, details and stipulations can vary. Although, most agencies have common staple coverage in the policies that are similar across the board.
There is also Personal Injury Protection or quickly referenced as PIP, is also known to be called “no fault” insurance. Only certain states require said coverage:
- New Jersey
- New York
- North Dakota
- District of Columbia (D.C.)
Under no fault laws, during an accident, your insurance agency will step up and pay for any damages, but only as much as your policy limit states no matter who is at fault; you or the other party involved. When other parties are involved, their insurance company will come and pay their covered policy holder. In the even you are required to have no fault insurance, choosing a deductible is not necessary.
The Best-Fit Deductible For You
When it’s time to start choosing your preferred deductible, a couple of questions may start to swirl around in your head:
What are the chances that I’ll even be in an accident?
- What are the chances that I’ll even be in an accident?
In the event I am in an accident, what would the damages run me anyway?
- In the event I am in an accident, what would the damages run me anyway?
What type of savings do I have that I could afford to pay for damages in case of an accident?
- What type of savings do I have that I could afford to pay for damages in case of an accident?
What type of savings am I looking for on premiums in order to justify taking such risks?
- What type of savings am I looking for on premiums in order to justify taking such risks?
Rationally speaking, if you have the loot put back to fork over the deductible in the event of an auto accident, then you may consider choosing a higher deductible, which would mean you would have much lower monthly premiums. Many smart shoppers and decision makers who assess their risks according to their lifestyle opt for this type of insurance coverage, as they are typically more cautious than those who miss deadlines, brush small accidents or mishaps off or otherwise not concerned with savings or amounts.
In case you are not that warm with the idea of raising your deductibles, but really enjoy the idea of reducing your monthly payments and premiums by as much as 40%, learn how by reading up on these suggestions on other methods to save.
Look Under Every Rock Before Shopping At One
It is important to assess your policy and review it with your insurance agent at least twice a year to compare potential savings and rate changes. Do not forget to also compare your agency’s rates against at least three other agencies in order to ensure you are getting the best rate. Alternatively, you could chime in and visit your local state insurance department who might have access to a comparison chart that lists all the major insurers.
All of this running around and digging is not worthless and has its value in time spent in the hunt because the competition is very cutthroat and dollar difference shopping between agencies can end up providing real tangible savings. Insurance.com is one of the easiest ways to compare the costs of insurance. With a few minutes of your time, you can collect several enticing quotes from top well-known insurance agencies in the blink of an eye.
After finding the rates that best fit you, it is time to make sure your selected insurer is financially stable. Smart shoppers usually use these two rating companies to determine the scope of operations of nearly any business:
- A.M. Best
- Standard & Poor’s
Additionally, consumer magazines can prove to be a valuable resource and extremely helpful when looking to learn more about a company. Along with your state insurance department, friends and family members can help guide you away from certain mistakes like selecting the wrong insurance company. Be sure to check and make sure your selected insurance agency does have an army of disgruntled customers who have a lot of negative things to say about the quality and level of service offered.
Other Places to Consider Trimming Extra Insurance Weight
While playing around with different deductibles and premiums is fun, not all outcomes will be suitably attractive, but we still need coverage, so with that in mind, there are a few other places you can go to trim off some of the extra insurance weight:
- When buying a new car be sure to check into the specific insurance costs before making those final signatures. Premiums correlate with several factors like sticker price, cost of repairs, safety driving record and regional theft statistics.
- It is important to keep in mind the fact that cars with anti-theft devices and other driving safety feature (daytime running lights for example) can yield some notable discounts. Referencing the Insurance Institute for Highway Safety is an excellent tool to help compare and rank each make and model against another.
- If you are driving an older car, letting go of your collision and/or your comprehensive coverage may also be an option. A general rule of thumb is that if your car is worth less than 10 times the amount of the premium, then it may not be worth the additional cost of additional coverage deductibles. When evaluating the value of your automobile, Kelley’s Blue Book is considered the industry standard.
- Bundling different insurances like homeowners with your auto insurance can provide bulk or group insurance discounts.
- Keeping your credit in good standing is great not only for insurance but for other reasons too. Insurance agencies tend to look at credit scores to calculate or determine premium rates. An unsavory credit history could result in higher premiums.
- Sounds dumb, but driving less could also give you a few bucks off from your auto premiums. If you drive your car less than 10,000 miles a year, you may be able to qualify for a low-mileage discount. Check with your agent to see if they offer this type of savings.
- Acknowledge your membership programs. Some insurance agencies will offer discounts to members of certain organizations like AARP or AAA. Check with your provider to see which programs they partner with.
- Lump sum premium payments can actually save you a little dough too. Sure, the benefits of breaking your total premium up across a 3 or 6-month span is nice, you could also benefit from small savings if you can handle forking over the total amount upfront. Some companies offer discounts for total premium payments. Check with your agency.
- Do not forget to pay or renew! Never let your insurance lapse. Insurance companies, especially auto and car insurance agencies do not like it when there are lapses in insurance coverage. This factor alone could raise your premiums and potentially make you ineligible for other policy discounts.