Raise Auto Insurance Deductibles For a Lower Rate
Reader’s Question:
I live with my big sister, and she keeps telling me to up my deductibles in my auto-insurance to lower my premiums. Is there any merit to this idea?
Caleb
Columbus, OH
Good day to you, Caleb! Well, you seem to be, well, irritated by big sister’s constant “advice.” Anyway, there is truth to what your sister is saying. Let me outline how this thing works for you to better understand it.
Okay, what is a deductible in the first place? The deductible is that value you agree to shoulder once you file a claim with the auto insurance company. An example would be if you file a claim of, for ease of computation, just $1,500. If your auto insurance deductible is $500, then the auto insurance company covers the $1,000. Increasing your deductible value means a lower cash-out for the auto insurance company. So, how would it affect your premiums? Think of it this way, it is kind of like betting, and both you and the auto-insurance company are on a see-saw. So, when you assume more of the risk, the risk on the auto insurance company’s side becomes lower, so they’d ask you put in less money. After all, you would be paying more for the claims now. Why do this? If I was in your shoes, I would assume that I am a safe driver, assuming more risk means making a bet on that being “safe” at most time. I’d agree to have more deductibles. Now, you can give big sis a break.
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