There is no denying that times are tough and it may get worse. So, it is time to buckle up and hope to come out on the other side with the minimum damages. Many people want to reduce their expenses. The problem is that it is hard to do it when the tide is coming in. It requires a little bit of knowledge to get cheap automobile insurance when the companies are hiking rates all over the place.
There are only a few reasons why carriers would offer great quotes. The main ones are; having a good driving history, no claims, great credit score and having a safe car. The problem is that these things take time to build. It is hard to turn it around in a short space of time. For example, companies look at the last five years in terms of claims and driving history.
What Car Insurance Deductibles Are
In order to use them meaningfully we need to understand what they are and how they work. They are the amounts you have to pay out of pocket in case of claims. For example, if your deductible on collision is $250 and you had a crash recently, you will need to pay the first $250 and the rest is settled by the insurer, no matter what the amount is.
So, if the damage is only $500 many people would just pay it out of pocket, instead of sharing it with the insurer half and half and ending up seeing premium increase next year that is more than the $250. The problem is even a small claim like that counts as one and goes on your record.
Do You Increase or Decrease Them?
For some reason, many people are on the lookout for lower deductibles. This is fine if the premium quoted is the same. Otherwise, paying extra to have them reduced may only make sense if you are expecting to make several claims in a year. Also, many companies don’t actually go down below their standards but they can go up.
One critical point here is that deductibles come to play only when you have a claim. Otherwise, they are just there to influence the premium. In other words, it may sound more desirable to keep them low but it is only the case for people who make claims.
Why Do They Offer Lower Auto Insurance Rates?
It is all about the mindset. When a motorist offers to increase the deductibles what he/she is saying is that he isn’t concerned with small damages. He will bother them only when there is a big claim. The thing is that small claims are very common and they cost a lot of money in terms of administration and handling. The big ones come along once or twice in a driver’s life.
The more a person is willing to share the risk the more likely the vehicle insurer will like them. That is the bottom line and that is why deductibles are a powerful way of saving money.
Who Should Consider Increasing Them?
Safe motorists could save a lot of money on premium over the years by accepting to pay more out of pocket in case something happens. Say, you increased them to $500 and you saved $250 for the same amount of increase. If you have one claim within the next term of your policy you don’t lose anything. However, if you don’t have any claim in the next 10 terms you save $2,500.
Nevertheless, you should consider this option if you don’t have any savings to come up with the money and you have a patchy driving history or you just added a bad or young driver to your policy.