Deductibles are often ignored or their functions aren’t appreciated and can be used just like adjustment knobs on a policy. When they are turned up the premiums can go down while the out-of-pocket amount in case of claims go up. That is why they should be seen as tools to fine-tune vehicle insurance costs and expectations. Let’s look into various circumstances in which they can help or hinder.
First of all, most companies wouldn’t allow motorists to lower the standard deductibles already set. But they can be brought down if they were increased previously. There are policies with vanishing amounts, where every year that there is no claim they go down. You can choose such plans if you feel you like to be rewarded this way. But they shouldn’t be confused with you choosing to pick a lower amount on a policy at any time you like. They come with conditions and they work only when the conditions are met.
Deductibles usually apply to Collision and Comprehensive portion of full coverage car insurance and Liability section usually doesn’t have them. It is important to be aware of the fact that they are applied to each and every claim. So, someone can end up paying them several times in one policy term.
Drivers may end up paying larger amounts out-of-pocket when they are set high. This can be a real problem when you don’t have enough savings in the bank. Most motorists prefer low deductible auto insurance for obvious reasons. All being equal nobody would do otherwise.
However, increasing them can save you money on premiums because you take more risk as you accept to pay more out of pocket in case of a claim. This could work out well for an experienced driver who hasn’t had any accident for some time and doesn’t foresee any change. If you are confident that you are unlikely to have any incident or loss in the near future you might as well enjoy a good discount.
This is not the only reason companies like to see bigger amounts and don’t mind reducing rates in exchange. Larger deductibles mean that you have a less chance of making a claim as well. For example, if you increase them to $1,000 your damages must be more than this amount for you to get any compensation from the vehicle insurance company. They always cover the first part of any loss you suffer before you can get the rest from the carrier.
Making a choice can be a bit tricky. Experienced drivers may be getting really good rates and there may be very little room to reduce rates any further. On the other hand, a teenager is more likely to make a claim and face out of pocket payments as a result. So, it may be a riskier move to push them up. Also, they should think about having a bad year with several incidents.
Car insurance deductibles can be extremely helpful when the policyholder is struggling to pay the premium and considering dropping Collision and Comprehensive coverage as a result of it. In such cases, they can choose to increase the out of pocket commitment if it can bring down the premium enough so that they can keep the coverage.
Let’s say the premium is $2,000 with a standard deductible of $300 and it goes down to $1,400 if you commit to pay $1,000 out of pocket in case of a loss. The savings for today is $600 and it may be enough to lower the costs to an affordable level to keep the coverage. If the value of the automobile is $5,000 and it is totaled after a crash the owner would get $4,000 in this scenario. But, he/she would have to pay all the repair costs out of pocket if the damages are around $1,000. This approach would maximize the savings today and still provide security in case of large insured losses.
It is a give and take and everyone would have his/her own view about the way to proceed. Whichever way you are inclined, you should still get a few quotes with different levels of deductibles and maybe with full coverage and Liability only to see the costs in various cases. Seeing the figures in front of you would make the choice easier.