When To Assume Higher Risk With Auto Insurance

One of the easiest ways to lower your auto insurance premium is to assume higher risk. To do so, you have two options:

• Taking on higher deductibles.

• Lowering or dropping your full car insurance coverage.

 

Adjust Your Full Car Insurance Coverage

If you have a vehicle that's at least 10 years old and has lost its value, consider adjusting your full car insurance coverage. One way to do this is to drop collision and comprehensive protection. Otherwise, you're probably paying for more insurance than you need.

For instance, if your vehicle's current value is listed at $1,750 and you have a collision policy with a $3,500 limit, you're paying for far too much insurance protection. You could easily save yourself money by dropping the entire policy and assuming all of the risk of the vehicle. This is especially wise if you don't have long-term plans for the vehicle and limit its use to running local errands.

For help in determining your car's value, consult either the National Automobile Dealers Association (NADA) or Kelley Blue Book.

 

Assume Higher Risk With Higher Deductibles

Assuming the risk of a higher deductible is a fast and easy way to lower your insurance premiums. The difference between say a $250 deductible and a $1,500 deductible could be as much as several hundred dollars. The actual difference, of course, depends on your provider and current vehicle situation.

But before assuming the financial risk of a higher deductible for your auto insurance policy, ask yourself the following:

• How much money do I have in my savings account? If your account balance stands at $637 it would not make financial sense to carry a $1,000 deductible. Otherwise, if you're involved in an accident, you won't have enough money to cover your deductible. And until you pay the deductible, your insurance provider won't kick in a single dollar.

• Am I prone to car accidents? If you answer no, you should give strong consideration to a higher deductible.

• How long is my daily work commute? If you work from home or take public transportation, assuming more risk may be a wise decision.