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UPDATED: Jan 6, 2017
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If you can’t manage your account online, you can also contact your car insurance company directly. Before you make the change, however, you should get a quote from multiple companies to see if anyone else can offer you a lower rate.
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Will my premiums increase if I decrease my deductible?
Your car insurance deductible is the amount of money that you pay out of pocket when and if you cause a car accident. The insurance company bases part of your insurance rate on how much you are willing to pay out of pocket if an accident occurs.
The higher your deductible is, the cheaper your premiums are going to be.
A high deductible means that you are taking responsibility for more of the costs associated with the accident.
Insurance companies aren’t saving a ton of money if you have a $20,000 accident and you pay $500 out of pocket, but they will lower your car insurance costs quite a bit if you choose the $500 deductible over the $250.
Why? Because you are more financially involved in your driving than someone with a lower deductible.
According to the Insurance Information Institute’s article on “Understanding Your Insurance Deductible,” insurance costs are lower for people with a higher deductible because the deductible represents a shared risk between the insurer and the insured.
Additionally, if you have a small accident, you are less likely to file a claim if you have a higher deductible, which saves the insurance company money. Even if you do file a claim, the financial responsibility of the provider will be minimal.
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When should I decrease my deductible?
Some insurers will tell you that it’s never a good time to lower your deductible. However, if you can’t afford $500 to $1,000 out of pocket at one time, then you should consider lowering your deductible.
For many people it is easier to make a smaller monthly payment than it is to save a larger sum of money.
What’s more, if you have more than one accident, then it is unlikely that your monthly premium requirements will exceed the amount that you pay out of pocket, especially if you have a high-dollar deductible.
However, if you have too many accidents, your car insurance premiums may get out of hand, especially if you cause the accidents.
What are my insurance deductible options?
The amount of your deductible can depend on the car insurance company that you choose.
Many companies only offer two options: $250 and $500. However, some companies allow you to choose deductibles over $1,000.
Keep in mind that after a while there is no financial benefit to choosing such a high deductible in terms of premium savings.
Some companies also offer the option of no deductible, although this is becoming rarer. Remember that this will be the most expensive option regarding your premiums.
What if I can’t afford to pay my deductible after an accident?
If you have trouble paying your deductible, companies usually take one of two paths when paying a claim.
The first path is to pay a check to cover the cost of your claim, minus your deductible. If this is the case, then all you have to do is find a mechanic who will take care of your repairs with the amount that you received from the insurance company.
Many mechanics are willing to offer a discount for a large job or waive certain fees to help you out.
The other path is that the insurance company pays the mechanic directly and only for the costs of the repairs. If this happens, then you could be in trouble in terms of your deductible.
Talk to the mechanic and see if you can work out a payment plan. Many are very flexible about this, especially if they have been paid for the rest of the work.
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