Raising Your Deductible - Weighing the Risks vs the Benefits
One way to manage the cost of your premiums is to raise or lower your deductibles. Higher deductibles mean lower premiums. But there is a balance between saving money and putting yourself in financial jeopardy. Adjusting your deductibles according to your personal needs is a tool you can use to leverage your ability to buy insurance.
The important thing to keep in mind is that you must pay your deductible before the insurance will cover the rest of a claim. So if you set the deductible to a high amount, such as $1500, then you will have to pay that amount out of pocket before your insurance will do anything. It may sound tempting to set a high deductible in order to get lower premiums, but if you set them too high, your insurance will not be much help unless have the cash available to pay them.
On the other hand, if you have very little cash flow you can opt for having low deductibles or none at all. Your premiums will increase as the deductible goes down, but it may be more affordable to pay higher premiums than to have to allocate a portion of money to always be available in an emergency. Both higher and lower deductibles work for you, they just work for you in different ways.
Another thing to consider is the age of your vehicle. If you are driving a 10 year old sedan, the insurance company is not going to offer you a high cash value if the car is totaled, and many relatively minor damages could push the car's value beyond the total limit. To save money and accomplish the same thing, set your deductibles high to reduce premiums and plan on replacing the vehicle with another older car if you get into an accident. Also, be sure to compare insurance quotes on a regular basis (at least every 6 months) to see if you can save by switching insurers.