Should you increase your auto insurance deductible? Only if you can say yes to this

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For many drivers, car insurance is a big expense – and an unavoidable expense. The good news is that there are things you can do to lower your car insurance premiums. For example, if you take a defensive driving course, your car insurer might give you a discount, because by taking this course, you might seem less at risk. Likewise, maintaining a safe driving record without shifting violations could also result in lower car insurance premiums.

But you can take another step to reduce your car insurance premiums: increase your deductible. Your deductible is the amount of money you have to pay out of pocket each time you file a claim against your car insurance policy. Say your vehicle sustains $1,500 in damage for something your insurer will pay. If your deductible is $500, that means you will pay that amount and your insurer will cover the remaining $1,000.

Some drivers prefer to keep their car insurance deductibles as low as possible. But increasing yours could pay off – under the right circumstances.

Why it might be beneficial to have a higher deductible

At first, the idea of ​​a higher car insurance deductible may seem silly. After all, who would want to sign up to pay After paid for claims?

But the benefit of increasing your car insurance deductible is that it will usually result in lower premium costs. If you don’t drive very often and think you’re less likely to have accidents or sustain vehicle damage, trading a higher deductible for lower premiums might pay off. But if you want to increase your deductible, you’ll have to make a move first.

Evaluate your savings

Raising your deductible means having to pay more each time you file a claim with your insurance. It is therefore important to ensure that you have enough money in the bank to absorb these higher costs.

To that end, take a look at your emergency fund before moving forward with a change to your auto insurance. If your emergency savings are strong, increasing your deductible might not be a bad decision. The logic is that you can dip into your savings to cover your deductible as needed, but you’ll also benefit from lower premium costs which could, in turn, help fill your emergency fund.

But before moving on to a higher deductible, make sure you have plenty of cash. at present. Don’t assume that the savings you’ll make over time by lowering your premiums will help you build up emergency savings in case you need to dip into a car-related problem. If you make this change and have an accident three weeks later, you may be out of luck.

Car insurance premiums and deductibles tend to have an inverse relationship – the higher one, the lower the other. If you’re inclined to increase your deductible, make sure your emergency fund can handle it. And if not, wait until you have accumulated more savings to take this step.

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