Car Insurance Deductibles in a Down Economy
By: Chuckie
Many consumers are looking to cut household
expenses any way they can in these uncertain economic times. The
first place most households often look is car insurance
premiums. To clarify, a car insurance premium is the amount you
pay to the car insurance company on a regular basis (ie monthly)
so the car insurance company will fix your car in the event of a
car accident. Car insurance can be considered a necessary evil.
No one likes paying for car insurance. You have to pay for car
insurance when you don’t use it and when you finally need it;
car insurance companies make it a major hassle to obtain your
money from them to fix your broken car.
One of the most common ways to reduce your
monthly car insurance premium is to increase your insurance
deductible. What is a deductible you ask? A deductible is the
amount of money you pay out of your own pocket in the event of a
car insurance claim (i.e. a car accident that is your fault).
As tempting as it may seem to raise your car
insurance deductible to reduce your monthly insurance payment,
you need to evaluate your financial situation first. For
example, ask yourself, “If I raise my deductible from $1,000 to
$2,000 do I have the $2,000 deductible set aside in the event I
get into a car accident?” If the answer is no, you may want to
postpone raising your car insurance deductible until you save
$2,000 and can comfortably put it aside. If the answer is yes,
you still need to consider your car driving habits and your risk
of a car accident.
Your car driving habits can alter your car
insurance expenses significantly. If you are a safe driver and
can go a long period of time without getting into a car
accident, raising your deductible may be a smart move. If you
are not a safe driver and you frequently get into car accidents,
raising your insurance deductible may not be worth it. The
longer you go without getting into a car accident, the more
money you save on car insurance expenses. If you get into a car
accident shortly after raising your deductible, you may end up
losing money. Let’s look at an example.
If increasing your deductible from $1,000 to
$2,000 decreases your monthly car insurance premium by $25, then
it would take 40 months (starting from the date you raise your
car insurance deductible) for your monthly savings to cover the
$1,000 increase in deductible (40 x $25 = $1,000). So that means
if you have an accident during those 40 months, you are better
off keeping your deductible at $1,000. With your driving record,
can you go 3 years and 4 months without a car accident? If not,
you may want to reconsider or change your driving habits.
So, you are a great driver and fully confident
in your ability to go 3 years and 4 months without a car
accident. Too bad it’s not that easy and too bad we don’t drive
on roads without other vehicles. You also have to consider other
drivers on the road. We all know there are plenty of dumb
drivers on the road. Due to congestion and higher population,
there are a larger number of morons on the road in the city than
in the country. Your chance of getting into an accident in an
urban environment is a lot higher than in a rural environment.
So carefully take into consideration where you live, work and
play before you raise your car insurance deductible.
About the Author
Charles is a car insurance enthusiast who wants to help you
prevent the mistakes he made.
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