Auto insurance can be a very complicated beast with lots of different numbers and questions regarding what is really covered and how much it is covered for. For example, let's say that you have had your current car for around four years and recently received an email about a simple way that you can decrease your monthly premium.
A premium is the amount that must be paid to an insurance agency monthly to ensure that you are covered, whether you need it or not. Commonly, if you have a lower deductible, you have a higher premium, and the opposite is also true—the lower your premium, the higher your deductible.
Continuing with the example, you figured that since you haven't gotten in a wreck in the last four years, you would increase your deductible in order to save money monthly. Just to be clear, a deductible is the amount that must be paid upfront on a claim before the insurance company will pay their portion of the repairs. So where your deductible was once $500, it is now $1500.
Unfortunately, for you, someone stopped quickly at a red light in front of you and a quick crunch later has left you without the front end of your car. You may now find yourself in a place where you are unable to pay the deductible on your car and cannot afford the repair even though you have insurance.
Understanding the simple relationship between premiums and deductibles can be a powerful way to ensure that car owners are not being taken advantage of by insurance agencies. Do not set yourself up for failure by setting your deductible at an unreachable limit.
It is important that individuals are able to both understand and pay their deductibles in order to get the help they need from their insurance agencies. After all, what is the point of having insurance if it cannot help you when you need it most? Unfortunately, the above example happens too often. This is often the reason why you will see people driving around in cars that have been damaged but are still running.
A word to the wise auto insurance policy holder: Know what your deductible is and have an emergency plan of how you would gather that amount of money should you need it. Car insurance is a wonderful tool that can be used for your advantage or against you. Make sure that you save the resources you need in order to cover your basic needs.
Contact an auto insurance company near you to get a free insurance quote and see how varying deductibles affect your monthly premium.