How Raising Your Car Insurance Deductible Could Save You Money

Today, everyone seems to be looking for ways to save money. From clipping coupons to eating dinner at home, cutting costs has become a way of life for many.

When it comes to auto insurance, there are a number of ways in which drivers can score significant savings. One of the easiest ways to lower auto insurance premiums is by increasing the deductible.

What is a deductible?

For anyone with auto insurance, the deductible is an important component. The deductible is the out-of-pocket expense the policy holder is responsible for paying for any insurance claims. Deductibles can range from as little as $100 up to $2,500. You can even carry an auto insurance policy with a zero deductible.

Let's say you have a deductible of $500 on your auto insurance policy. If you are in an accident that results in $2,000 worth of damage, you will need to pay $500 toward the total costs, while your insurance company takes care of the remaining $1,500.

What are the benefits of raising your deductible?

The amount you must pay for auto insurance depends on several factors, including the value of your vehicle and your driving record. Even your credit score can come into play when shopping for auto insurance.

Another component that impacts the overall cost of an auto insurance policy is the amount of the policy's deductible. The higher the deductible, the lower the insurance premium will be.

Therefore, raising your deductible could be an ideal way in which to save money on your auto insurance.

How much you decide to raise the deductible will be based on several factors, including how much you could reasonably afford to pay if you are in an accident. If you have a deductible of $250 but could handle paying $500 if necessary, raising your deductible by $250 could be the way to go.

Are there risks associated with raising your deductible?

Raising the deductible on an auto insurance policy is not necessarily the right move for everyone. There are risks associated with a higher deductible that should be considered.

Before raising your deductible on your auto insurance, you should take into account your driving history. Do you seem to be accident-prone when behind the wheel? Do you have a history of file claims often?

If your driving record includes several fender-benders or any serious accidents, you might want to consider keeping a conservative deductible that you can afford easily.

In addition, if you do not own your car outright, the lending company that holds the title of your vehicle might have a maximum deductible requirement. If you are still paying off your car, you should contact the lien holder to find out if there is a maximum deductible before making any changes to your auto insurance policy.

Are there other ways to save money on auto insurance?

Fortunately, there are several ways you can lower your auto insurance premiums in addition to raising your deductible.

If you have other forms of insurance, such as homeowners insurance, you should be able to get a discount by combining your auto insurance with other insurance policies with the same insurance company.

Many insurance companies also will offer special auto insurance discounts if your vehicle is equipped with certain anti-theft or safety devices, such as an alarm or airbags.

Your auto insurance provider should be able to provide you with a list of available discounts.