Raising and Lowering Premiums and Deductibles

No one actually enjoys paying for car insurance.  Each time you cut a check its as if you get that horrible feeling of throwing money away.  The truth of the matter is that insurance IS important, and although paying any bill on a monthly basis is frustrating, insurance prices are something that actually can be controlled to some extent.  If you happen to be a safe driver with a clean driving record you could consider increasing your auto policy’s liability insurance deductible.  There is a common belief is that by raising the deductible you can lower your premium.  While considering such a situation like this, ask yourself if the increased risk is worth it.

Higher Deductibles Can Lower Premiums

Your auto insurance deductible is what you pay on an insurance claim before your insurance company starts to pay.  Some people think that by having a high deductible your premiums are lower because the company’s costs are reduced by the amount of deductible.  The fact of the matter is that higher deductibles equate to less insurance claims filed, which means that to the company who insures you, you are a low risk candidate.  That’s why they can offer lower rates to such a person.

Not having an insurance claim n the first place is more profitable to the insurance company than any claim at all.  By being able to predict consumer behavior they can accurately forecast situations and make money based upon their findings.  Higher deductibles are something that they happen to monitor very carefully.

When Lower Premiums Cost More

In order to make an informed decision on whether or not to lower your premium is by asking yourself the following question: How will lowering my premium affect me and my driving?  If you feel that you can go claim free for a year you might be better off by reducing your premium.  The issue is, if you do happen to get into an accident you pay more upfront.  By considering your past driving behavior and doing a cost benefit analysis you can figure out what the best situation is for your family and you.

On the other side of the coin, the savings per month might only be 50 or so dollars and in the long term may not be worth it.  One claim filed will kill the savings you had all year and put a heavier burden on you at the time of the incident.  The relationship between premiums and deductibles is interdependent.  When one is high the other is low.  Depending on your history and how you feel about the situation, you can now make a more informed decisions on premiums and deductibles.

Comments (0)

Leave a Reply