If you're frustrated by the ever rising costs of your car insurance premiums, here's a great way to help reduce your out-of-pocket costs both immediately, and over the long-term.
We all know that the law requires every driver to carry a minimum amount of insurance coverage.
But drivers consistently overspend on this coverage, and it's a huge waste of money.
So the technique I'm about to show you will help to keep you from overspending, regardless of the state coverage requirements and regardless of your insurance carrier.
In truth, there are a number of ways to make sure your monthly car insurance premiums remain low in the face of rising insurance costs, but one of the most effective ways is through your choice of Deductibles.
The Deductible is simply the fixed amount that you pay (in addition to your monthly premium) in the event of an accident and a claim against your insurance policy.
And as you're about to see, the Deductible can have a huge bearing on the total cost of your insurance premiums.
Most insurance companies offer a range of Deductibles that you can choose from, and in most cases it's between $250 and $1,000 dollars.
But the cheaper deductible ($250) isn't always the best choice.
In fact, in most cases it's the worst choice from an economic standpoint.
Generally speaking, if you opt for a low deductible, say $250.
00, your monthly car insurance premium will be higher because you are asking the insurance company to take on more of the financial risk in the event of an accident.
However, if you opt for a higher deductible, say $1,000, your monthly premium will generally be much lower because you are asking the insurance company to take on less of the financial risk in the event of an accident.
A simple way to judge the merits of the higher or lower Deductible is to have your carrier give you a quote on a range of Deductibles.
For example, ask your carrier to quote your coverage based on Deductibles of $250, $500, $750 and $1,000 (or higher if you like).
It's important to note, that in order for this suggestion to work properly all of the quotes should be identical in every way, except for the change in the amount of the Deductible.
The Deductible should be the only variation.
So let's look at some numbers and see how it actually works.
Let's say your insurer quotes your monthly premium, based on a 6 month policy as follows:
So here are the calculations on this example:
You will save a smooth $150 per month in premium charges compared to the $250 deductible (choice #1).
And, if you don't have a claim during that 6 month period, you'll never have to pay out the Deductible at all, saving even more money (i.
e.
saving $1,000).
But even in the worst case, if you do have a claim that is greater than your Deductible, you're total costs still remain less than any of the other options.
Now, there is a slight down-side to this strategy.
If you take the $1,000 deductible (for example), and you have an accident that costs less than $1,000 to repair, you'll pay 100% of the costs of that repair.
But the good news is you'll save $900 in premium costs, so the real costs of the deductible is only $100! I look at it this way.
The odds of having a traffic accident in Texas are around 2%, so why spend a lot of money on insurance when the risks of an accident are so low? Now please take note that the deductibles and monthly premiums I've used merely represent a hypothetical example of how the evaluation process should work.
So don't assume that your car insurance quotes will look exactly like the ones in my example.
Every driver has a different set of circumstances, and so the rates can be vastly different.
But you can see from this example how the Deductible evaluation process should work.
Just follow these simple steps, and take advantage of the value and the cost savings you can achieve by getting quotes on a range of deductibles.
Then compare them side by side.
It will help you make better decisions, and it can save you a lot of money.
Oh, and one last thing.
When shopping for car insurance, make sure you get quotes from several different insurance companies.
This will take a little more time up front, but it will help you locate the least costly auto insurance in your area.
Just use this deductible technique with several different insurers, and you'll be amazed at the money you'll save.
We all know that the law requires every driver to carry a minimum amount of insurance coverage.
But drivers consistently overspend on this coverage, and it's a huge waste of money.
So the technique I'm about to show you will help to keep you from overspending, regardless of the state coverage requirements and regardless of your insurance carrier.
In truth, there are a number of ways to make sure your monthly car insurance premiums remain low in the face of rising insurance costs, but one of the most effective ways is through your choice of Deductibles.
The Deductible is simply the fixed amount that you pay (in addition to your monthly premium) in the event of an accident and a claim against your insurance policy.
And as you're about to see, the Deductible can have a huge bearing on the total cost of your insurance premiums.
Most insurance companies offer a range of Deductibles that you can choose from, and in most cases it's between $250 and $1,000 dollars.
But the cheaper deductible ($250) isn't always the best choice.
In fact, in most cases it's the worst choice from an economic standpoint.
Generally speaking, if you opt for a low deductible, say $250.
00, your monthly car insurance premium will be higher because you are asking the insurance company to take on more of the financial risk in the event of an accident.
However, if you opt for a higher deductible, say $1,000, your monthly premium will generally be much lower because you are asking the insurance company to take on less of the financial risk in the event of an accident.
A simple way to judge the merits of the higher or lower Deductible is to have your carrier give you a quote on a range of Deductibles.
For example, ask your carrier to quote your coverage based on Deductibles of $250, $500, $750 and $1,000 (or higher if you like).
It's important to note, that in order for this suggestion to work properly all of the quotes should be identical in every way, except for the change in the amount of the Deductible.
The Deductible should be the only variation.
So let's look at some numbers and see how it actually works.
Let's say your insurer quotes your monthly premium, based on a 6 month policy as follows:
- $200 per month based on a $250 deductible;
- $150 per month based on a $500 Deductible;
- $100 per month based on a $750 Deductible, and;
- $50 per month based on a $1,000 Deductible,
So here are the calculations on this example:
- ($200 X 6 mos.
) + ($250) = $1,450 - ($150 X 6 mos.
) + ($500) = $1,400 - ($100 X 6 mos.
) + ($750) = $1,350 - ($50 X 6 mos.
) + ($1,000) = $1,300
You will save a smooth $150 per month in premium charges compared to the $250 deductible (choice #1).
And, if you don't have a claim during that 6 month period, you'll never have to pay out the Deductible at all, saving even more money (i.
e.
saving $1,000).
But even in the worst case, if you do have a claim that is greater than your Deductible, you're total costs still remain less than any of the other options.
Now, there is a slight down-side to this strategy.
If you take the $1,000 deductible (for example), and you have an accident that costs less than $1,000 to repair, you'll pay 100% of the costs of that repair.
But the good news is you'll save $900 in premium costs, so the real costs of the deductible is only $100! I look at it this way.
The odds of having a traffic accident in Texas are around 2%, so why spend a lot of money on insurance when the risks of an accident are so low? Now please take note that the deductibles and monthly premiums I've used merely represent a hypothetical example of how the evaluation process should work.
So don't assume that your car insurance quotes will look exactly like the ones in my example.
Every driver has a different set of circumstances, and so the rates can be vastly different.
But you can see from this example how the Deductible evaluation process should work.
Just follow these simple steps, and take advantage of the value and the cost savings you can achieve by getting quotes on a range of deductibles.
Then compare them side by side.
It will help you make better decisions, and it can save you a lot of money.
Oh, and one last thing.
When shopping for car insurance, make sure you get quotes from several different insurance companies.
This will take a little more time up front, but it will help you locate the least costly auto insurance in your area.
Just use this deductible technique with several different insurers, and you'll be amazed at the money you'll save.
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