Raising Your Auto Insurance Deductible to Save Money on Premiums? Make Sure to Do This

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It could spare you a world of stress. 

When you own a vehicle, auto insurance can be a big expense. But there are different steps you can take to save money on premiums.

One option, for example, is to maintain a solid record of safe driving. Another is to take a defensive driving course. And if you’re willing to take a bit of a chance, you could try raising your auto insurance deductible.

You’ll commonly find that when it comes to auto insurance, premiums and deductibles have an opposite relationship where the higher one is, the lower the other is. Now having a higher deductible could mean paying more money when you get into an accident and need to file a claim against your policy. But that may not happen.

On the other hand, you’re guaranteed to have to pay your auto insurance premiums — regardless of whether you end up needing to file claims or not. So you may decide it makes more sense for your deductible to be higher and your premiums to be lower. But if you’re going to go this route, there’s one important step you need to take.

Make sure to pad your savings

You may not end up having to pay your auto insurance deductible if you manage to avoid accidents or incidents that would require you to file a claim. But if you’re raising your deductible, it’s important to pad your emergency savings. That way, you can be certain you have enough money in the bank to pay your deductible as needed.

And to be clear, you might have to shell out the money for your auto insurance deductible even if you’re not at fault for an accident. Often, what’ll happen is that your insurance company will process your claim, charge you your deductible, and then reimburse you once it’s gotten paid from the insurance company of the driver who caused your accident. But you’ll still need to come up with the money in that scenario.

So, let’s say you’re raising your auto insurance deductible from $500 to $750. You should immediately put another $250 into your savings.

Of course, ideally, your savings account will have enough money to cover more than just your car insurance deductible. But at a minimum, once you make that change, your savings should be boosted so you don’t run into issues.

Don’t leave yourself short

You never know when you might need to dip into your savings to cover something related to your car, whether it’s your auto insurance deductible or a repair bill you’re responsible for on your own. That’s why boosting your emergency fund is a good bet in general.

A recent Federal Reserve study found that 32% of Americans don’t have the cash in savings to cover a mere $400 emergency. But if you drive a car, you’re well aware that $400 may not so much as cover a relatively minor repair. And it may not cover your deductible, either. So if you’re part of that 32%, make every effort to grow your savings so you’re not left scrambling in case something goes wrong with your car.

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