Why should you get higher deductibles on your car insurance

Why should you get higher deductibles on your car insurance?

We all want cheaper auto insurance? The price of insurance is so high in some places, especially for high risk group like young men and bad drivers that the yearly insurance costs nearly as much as the car. The solution? Well, you should start by getting older, that is not difficult, you could also learn to drive better. Another option is to get higher deductibles and you will see the cost of your insurance drop significantly. But let’s start from the beginning. What is a deductible?

A deductible is a way auto insurances and other types of insurance share the risk of insuring you and your property. When you take on a deductible on your insurance coverage you are agreeing to pay for the initial xxx$ of a claim. If you agree to a 100$ deductible on your collission coverage and you have an accident that costs 1000$ to set right. You will pay the first 100$ and the insurance company will honor the rest.

Why?

Deductibles share the risk of the insurance coverage. The philosophy is that people who have to pay for some of the damages they cause/suffer will be more careful, drive safely and maybe even think twice before making a frivolous claim. Of course the higher the deductible the cheaper the insurance.

Having a reasonable deductible can be a good idea for another reason also. It is not a good idea to claim for every small incident because it will affect your no claims bonus. This is a bonus that lowers your premiums every year as long as you don’t make a claim. This bonus can reduce your premium to up to 50% so it is a good idea to only claim when it is for a large amount of money you could not afford to pay or justifies losing the no claim bonus.

When to use deductibles?

So we have proven that deductibles on your insurance coverage can be a good idea. But when should you use them? All the time? On only some types of coverage?

That is a good question. I am glad you asked. There are specific types of coverage for which deductibles work great. Physical damage coverage covers any type of damage caused to you or your car, whether it is your fault or not. This is quite predictably an expensive insurance that can be lowered considerably if you take on a high deductible. You might want to take on a large deductible on medical expenses coverage, especially if you already have another kind of medical insurance.

So as you can see it is all a case of managing risk. If you are already covered for a certain type why double up. If you are not likely to claim for anything under a certain amount because you would lose a no claim bonus, why not arrange a deductible for that amount and get a further deduction on your premium.