Raising deductibles to lower car insurance premiums

Car insurance companies typically charge significantly lower premiums fore drivers with high deductibles. The deductible is the amount the driver assumes responsibility for in the event of a car crash.

Since every little increase to the deductible is a decrease to the insurance company’s liability, a high deductible can make a huge difference in the bottom line for drivers. But there are some risks in setting a high deductible.

It’s important for a driver to settle on a deductible he could live with in the event he was involved in a car accident. If the deductible is $1,500, the driver will have to pay that amount before the insurance company will pick up any bills. Some crashes are minor and drivers could be stuck with the cost of all of the repairs if they don’t meet the threshold for the insurance company to begin paying on claims.

On the other hand, if a driver’s car is worth $25,000 and it’s totaled, the $1,500 is still just a drop in the bucket, and the $50 a month the driver saved on premiums was completely worth it.

The rule of thumb when considering the size of a car insurance deductible is to set one that’s not lower or greater than the driver can afford. If it’s too high, the driver may not be able to come up with the money needed to make repairs. If it’s lower than the driver can really afford, he’s probably paying too much in premiums.