When buying a car insurance policy, you must consider the deductibles to work out the premium because there is a direct link between the two. Car insurance providers will tell you about the applicable deductibles based on the kind of policy and applicable for comprehensive and collision policies but not for liability insurance. The deductibles are payable only in case of a claim, and it can be a factor that drivers can use to bring down the premium. By increasing the deductibles, it is possible to keep the premium low and vice versa. You can take some calculated risks by considering your driving habits to underline the vulnerabilities that can lead to claims and think about accepting higher deductibles in exchange for a lower premium.
What are deductibles?
If your insurance policy has deductibles, it would clearly state the amount that you must pay from your pocket for every incident of claim before the insurance coverage comes into force. The insurance company will pay for damages to the extent of your coverage. If deductibles are $500, coverage is $50,000, and the claim is for $10,000 then you must first pay the deductible and then $9.500 would come from the insurer.
Auto insurance companies offer high-risk coverage for comprehensive insurance and collision insurance by charging a high premium. Collecting deductibles is a way of fixing the liability of car owners by insurance companies so that they are mindful about the amount to shell out in the event of a claim. This should act as a deterrent for filing too many claims that can drain out money of insurance companies.
Do a trade-off
It is not at all hard to find auto insurance companies that agree to high deductibles, and it can be a tool to keep premiums low. Since you know about your safe driving habits, you know best how much are the chances of accidents or damage that can trigger claims. If the chances of filing claims are low, then you can agree for higher deductibles. The insurance company would recognize it as an acknowledgment of higher liability and would not mind charging a lower premium.
Balance the premium with your budget
Car insurance is not cheap even if you manage to get the best rates. Since the premium is payable once a year in most cases and the deductibles might or might not be payable depending on whether you file a claim, it is a good idea to agree for higher deductibles to obtain a lower premium. This should ensure that the premium you pay remains within your budget and does not pinch your pocket.
Assuming that after paying a low premium for a few years you encounter a situation when you have to file a claim and pay the deductibles, then the total savings during that period should be higher than the deductibles. This you must keep in mind because it should not happen that the deductibles offset the savings generated as it would defeat the purpose of gambling with deductibles.