Thursday, October 11, 2012

Car Tips: Beating High Insurance Premiums

Let me start by saying... PLEASE do not think for one second if you operate a vehicle you should not have auto insurance! This is a MUST in almost every state by LAW (check your state's minimum insurance requirements).

BUT, you may be able to lower the cost of your insurance by increasing your deductible. Think of things this way. If you have a little fender bender, most likely you are not going to file a claim with your insurance company. Why? Well, first of all, claims will ultimately make your premiums go up so you won't want a strike that will potentially cause you to pay more to be covered. Second, you would want assess the damage. Do you have a ding you can over look? Or perhaps your damage is so minor that the cost of repair would be less than your deductible. Wouldn't it then make sense to just pay cash straight out for the repair? But where is that cash going to come from?

Well, talk to your agent about raising your deductible and calculate how much you would save monthly over the amount you are currently paying for the low deductible. What would it cost you over having a $1500 deductible over a $500 one? If you banked that savings in an emergency account, you would have the extra cash on hand to pay for any minor accident. And there's no need to go to insurance company to file a claim for repair. Secondly, if you do have a bigger accident, you have saved the funds for the higher deductible to be met in that emergency fund.

Let's do the math. State Farm stats say that one average it's customers file a claim every 19 years. And the insurance industry claims you are likely to have an accident every 17.9 years*. So, if you were able to drop your rates even $20 month, by putting that into savings instead of spending it, at a year's end you would have $300 saved for incidentals. At the end of 10 years, $3,000 and over the next 17-19 years in the event of an accident, you could have close to $6,000 saved to either handle repairs for small accidents or even easily pay the higher deductible in the event that you had a major accident warranting the need to file a claim. That's based on saving just $20/mo. What if you could save more, faster?

My suggestion would be to make sure you have banked your premium savings to always make sure you could handle the higher deductible payment if needed but to save 2 or 3 times that much which could save you having to file a claim even in a larger accident that would make more expensive repairs payable with cash instead. But MAKE SURE you save enough to ALWAYS be able to meet the deductible.

Remember: Take your personal driving record into account. If you often find your vehicle is making contact with another, this might not be a good idea for you. AND for this to work you HAVE to commit to putting your premium savings in an EMERGENCY ACCOUNT. If you have the money earmarked for auto repairs in the event of an accident, you won't be so worried about having a conversation with this guy -->


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