Need a surefire way to reduce the cost of your car insurance? Dave Ramsey recommends increasing your deductible, among other avenues. But, while this method may work for some drivers, it could be financially disastrous for others.
What Is a Car Insurance Deductible?
Your deductible is your share of your vehicle’s repair costs after an accident. For example: If you must file a claim, and your deductible is $500 — and the body shop’s bill is $3,000 — your insurance company will only pay $2,500. You’re responsible for the remaining $500.
When you increase your deductible, you shift more of the financial responsibility from your insurer to you. Then, because you’re less of a liability to the company, your insurance premium will drop to reflect that.
Should You Increase Your Deductible?
With the average cost of car insurance coming in at just under $1,500 for the year, it’s no wonder drivers want to reduce the expense. However, raising your deductible could backfire on you if you don’t have a healthy cash cushion. If you get into an accident and can’t afford to cover your deductible, you won’t be able to get your car fixed.
Unless you have a well-stocked emergency fund, you may be better off finding other ways to save money on your car insurance.
Other Ways to Save on Car Insurance
You can use many strategies to make your insurance more affordable. They include, but aren’t limited to:
- Asking about available discounts. Seniors, students, and other groups may qualify for a lower rate.
- Bundling insurance policies. The insurer may give you a deal if you insure multiple assets simultaneously.
- Shopping around. It’s worth taking time to compare prices from several insurance companies.
- Taking a defensive driving course. Some insurers will give you a discount if you can prove you took and passed the class.
- Switching to a lower-cost insurer. Check out the cheapest car insurance companies.
Remember: The best way to keep your insurance rate down is to be a careful driver. A clean driving record over the long haul shows insurers that you’re low-risk — and you’ll be rewarded for that.
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