Choosing a High or Low Deductible
The quickest method to decrease your premium on your home or auto insurance policy is to increase your deductible. First, you’ll need to consider how much money you’ll save with a lower deductible and if you’re financially able to pay the high deductible amount if you have a claim. If you tend to live paycheck-to-paycheck you may need to stick with a lower deductible but if you have enough money saved, then you may be comfortable with a high deductible. Yet even if you have enough money to pay a large deductible it may still be difficult to part with a large sum at once. Another strategy to having a high deductible is that it may deter you from making a claim. Insurance premiums favor people with no or few claims.
The type of coverage is another factor in determining a deductible. There are two deductibles on an auto insurance policy, one for comprehensive coverage and another for collision. The savings are small when increasing the deductible on your comprehensive coverage. If you increased your comprehensive deductible from $250 to $500 and had to make a claim, then it may take years to gain back the extra $250 through saving money on your premium. To save the most money on your auto insurance through increasing your deductible you’ll want to turn to your collision coverage. Plus, you have some control over being involved in a collision whereas comprehensive claims, such as theft, vandalism or hail damage are out of your control. The premium savings with a higher deductible depends on various factors such as age. A younger driver will typically save more than an older driver with a good driving record.
The decision on determining a high or low deductible is your own. Some people choose not to increase their deductible because they don’t want to pay a large sum of money at one time for something that isn’t their fault, for example a wind storm that causes damage to their roof or siding on their home. At the end of the day, you have to decide what you’re comfortable paying.