Looking for a sure way to lower insurance premiums? The number-one thing to do is raise insurance deductible. It is possible to save additional money by shopping around, bundling your coverage and taking advantage of discounts, but nothing lowers monthly premiums as fast as boosting the deductible.
At first blush, raising the deductible might seem like a bad idea, especially someone living paycheck to paycheck who lacks a substantial cash cushion. Boosting the car insurance deductible from $250 to $1,000 or raising the amount paid up front on a homeowner’s insurance claim may save some money on premiums, but what happens in case of a loss? Is the higher insurance deductible affordable, or will raising the amount come back to bite you?
It all depends on how one handles things after raising the deductible. If one fails to set money aside, that higher deductible could be unaffordable in case of a claim. If, on the other hand, one plans carefully, he or she can self-finance the higher deductible and bank the extra savings month after month. Here is a strategy from Underground Elephant, a national leading car insurance company, to make it happen.
Calculate the savings
Before raising the deductible, it is important to know how much the decision will save. The amount of premium savings will depend on several factors, from claim history and driving record to the company and its underwriting standards.
In most cases, the higher the deductible the more potential to save, so ask the insurance agent for several different quotes. Compare the amount currently paying to how much the new premium will be, then calculate the savings and start working on the plan.
Self-finance the new higher deductible
Once it is known how much can be saved by raising the deductible, it is possible to use those savings to self-finance the amount needed to pay up front. Keep in mind that many drivers go decades or even longer without an accident, and a large percentage of homeowners have never made a claim on their insurance policies.
Take the money that would have spent on the previous policy and put it in a savings account instead. If the old premium was $100 a month and the new one is $70, just bank that $30 every month. Once the higher prices deductible is fully financed, one will continue to bank those savings, building up an emergency fund in the process.
Build the emergency fund
Speaking of an emergency fund, it is smart to use the financing of the higher deductible as an excuse to beef it up. No need to stop with funding the deductible; it is important to continue to accrue monthly savings on the new premium, and there is no reason to waste that extra cash.
A person never knows when he or she will need the spare money, so it is prudent to bank those savings and set them aside for a rainy day. Even if a person never has a car accident or suffer a loss on their home, having that emergency fund in the bank will give him a peace of mind and make life that much easier.
About Underground Elephant:
Underground Elephant is a personal car insurance expert. From tips and tricks for lowering car insurance payment to a personal quote comparison tool from the nation’s top providers, Underground Elephant is taking the mystery out of car insurance.