June 27, 2011

The Relationship Between Auto Premiums And Deductibles

When people need to purchase auto insurance plans they are usually looking for ways to ways to keep their auto insurance premiums as low as possible. Although most car insurance companies extend discounts on premiums to insured people, many people look for other ways to cut down on the cost of their car insurance premiums.

A popular way people save on auto insurance premiums is by electing or changing their deductibles to higher limits. By electing higher deductibles on theft and collision coverage, insured people can save money on their car insurance premiums each year. Although car insurance premiums are not based strictly on deductibles, they are connected to the deductible selected by an insured. Most insurance companies offer insured people lower premiums on auto insurance plans when insured people select higher deductibles for typical coverage like theft and collision.

A deductible is an initial amount of money that must be paid by an insured out-of-pocket when filing a claim. Once an insured meets the deductible the car insurance company will pay the remaining amount. When insured people purchase car insurance, agents usually ask insured people ask them to choose a deductible amount for each type of coverage. By selecting a higher deductible, people will pay less for car insurance premiums.

Although electing a higher deductible is a great way to save some money on premiums, many insured people elect lower deductibles versus higher deductible limits because they do not want to have to pay too much out-of-pocket should they need to file a claim. By electing higher deductibles insured people will enjoy upfront savings on their auto insurance plans, but will wind up paying more than their overall savings should they ever need to file a claim and pay the higher deductible.

Insured people who are contemplating electing higher deductibles with the goal of saving money on auto insurance premiums should consider the consequences of doing so. Although electing a higher deductible usually results in lower insurance premiums, the savings are usually nominal. In addition, insured people only save money on premiums if they do not have to file a claim during a particular year. Electing higher deductibles does not guarantee savings.

Before electing higher deductible limits, insured people should weigh the pros and cons. Although insurance companies offer an upfront reduction on auto insurance premiums to insured people that elect higher deductibles on theft and collision coverage, insured people will have to pay more money out-of-pocket should they ever have to file a claim for theft or collision. For many insured people, electing higher deductibles limits may not result in any savings whatsoever. At the end, insured people may be better off electing lower deductibles limits.