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Is it wise to accept the maximum deductible to get cheap auto insurance?

When you start off on your tour of the internet, one thing becomes clear almost immediately. If you use the free online search engines, you can get a flood of quotes into your inbox. All the major auto insurers are tied into one or more of the search engines and they all respond to searches with their quotes.

Is it better to pay a higher deductible for car insurance?

This buries you under a mountain of information. There just is not enough time to follow up every quote on every changed variable. Assuming, of course, that you got quotes using different factors, e.g. changing the amount of the deductible, how many miles a year you drive, and so on. The only way you can work out how to get the maximum discounts is to play with the system. So, if you are starting the process of finding a new vehicle to drive, first check out the premium rates on all the makes and models you are thinking about buying. Read also: Finding auto insurance when you rent a vehicle.

You will be surprised by big the differences are. Then look at payment methods for the insurance. There are discounts available if you pay the premium as an annual lump sum. Should you bundle the auto with the home insurance? This can save at least 10%. Insure more than one vehicle? There are so many options giving you a discount, you need to work your way through multiple searches to understand how much money can be saved.

Talk to your friends and there is likely to be one suggestion they all make. Go for the maximum deductible. This gives you the biggest single discount. OK. So they are advising you to self-insure. Instead of looking to the insurance company to pay all your claims, big or small, you are signing up to a deal where the insurer only pays the big claims and you pay all the small claims. Look back over your driving career and talk to your family and trusted friends. Find out how many accidents they have had and roughly how much damage was caused. Read also: Two cheap auto insurance tips to follow.

If you find the majority of the accidents caused minor damage and no serious injuries, you are paying all those claims out of your own pocket. The reason why you get a big discount if you accept a big deductible is you end up paying most of the claims.

The insurer only pays for the exceptional accident. Let’s see how this might work. If you are unlucky, you might be involved in two minor accidents in one year. Suppose you have a deductible of $1,500. Can you afford up to $3,000 out of your family budget? If you have cash in your bank account, slack on your credit cards, or assets you can sell, you can ride out this hit. But if you have no margin of safety in your family finances, this $3,000 might tip you over the edge on other commitments.

Losing $3,000 might mean a default on your mortgage or missing payments on your credit cards with a flock of penalty charges settling like vultures around you. But if you have luck on your side, accepting the maximum deductible is the fastest way to buy cheap auto insurance. The wise driver puts some of the money saved to one side just in case a traffic accident does come. Read also: Comprehending the peculiarities of your car insurance.


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