What Happens to an Insurance Premium When a Deductible Is Lowered?
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Insurance Q&A: “What happens to an insurance premium when a deductible is lowered?”
First off, with regard to car insurance, a deductible is the amount of money you are responsible for paying in the event of an accident.
Deductibles Are In Place to Reduce Claims
Think of it this way; what would prevent us from filing a claim to fix every paint scratch or ding on our car?
Or visiting the doctor every time we sneeze if we didn’t have to come up with some of the money for the repair or the visit?
Insurance companies would quickly go out of business if they had to settle a claim for every negative event that occurred in the world.
Remember, insurers have to employ a lot of staff just to process a claim, no matter how small or large it is.
As such, your insurance premium will increase if you choose to lower your deductible.
When shopping for insurance, you’ll typically be offered a choice of deductibles ranging from $250 to $1,000.
The higher the deductible you choose, the lower your insurance premium will be.
Conversely, the lower the deductible, the higher the insurance premium.
Lower Deductible = Higher Premium
Higher Deductible = Lower Premium
It is generally recommended that you carry the highest deductible you can afford; this will likely save you money over time.
Sure, you’ll have to pay more in the event of a claim, but your insurance premium will cost less each year, which could offset future costs, assuming a claim even occurs.
You can take things a step further and avoid filing claims and just pay out of pocket for any property damage you suffer if financially capable, assuming its relatively minor.
If a bunch of claims show up in your records, you’ll be looking at higher insurance rates come renewal time.
If you’re looking to lower your existing insurance rate, you can adjust your deductibles to save on costs (as noted above), shop for insurance quotes online, and/or explore possible discounts that may have been overlooked.
Both of these options may allow you to keep or increase your current coverage or liability limits without lowering your deductible!