There are many variables that play a role in determining the fare you pay for car insurance, from your driving experience and the type of vehicle you use to your place of residence, to the type of work you do. Each of these factors will affect your final premium, but determining what role each of them plays could prove difficult or even impossible.
The formula for setting the premium is a closely guarded secret that insurance companies do not want to share. And while untaming this particular knot can be an exercise in frustration, there is another relationship that is quite easy to figure out.
This ratio is the ratio between deductible and monthly premium, over which you have almost full control. In the insurance world, deductibles and premiums move in opposite directions, and the increase in one can cause the other to stumble.
An increase in the excess of just a few hundred dollars could greatly reduce the amount you pay each month for your car insurance, but how can you make that change safely? The last thing you want is an invoice you can’t pay, or a car you can’t afford to repair, so it’s worth taking care of the change.
Check your savings for emergencies
One of the biggest obstacles to a higher deductible is simple fear. Motorists fear that the minute they increase their excess will be an accident and that they will get stuck with a huge repair bill that they cannot pay.
These fears are certainly justified, but they are also easy to overcome. If you want to allay these fears and increase your excess without any worries, you can rely on your emergency fund.
Hopefully you have already set up an emergency fund. If not, you can build it slowly over time, using the potential for lower insurance premiums as inspiration. Once you’ve saved a reasonable amount, you can slowly increase your franchise and gradually deposit the rewards savings into your account.
When you sought offers for your car insurance, you probably had a certain deductible in mind. You may have simply accepted the lowest possible franchise, arguing that it is good to pay less for repairs, and now you are stuck with too high a premium.
If you want to see where you stand and how much you could save, call your agent and ask for additional quotes. Ask what your premium would be if you increased the deductible by $100, $250, €500 or more. Once you know how much you can save, you can lay the foundation for it and start increasing your excess.
Bank your savings
Now that you know how much you can save by increasing your deductible, you can start to invest those savings. If you are uncomfortable switching from a very low to a very high deductible, look for a golden middle ground and do so instead.
If you pay your car insurance premium every month, take the money saved and put it in the bank. That way, the money is there when you need it, and if not, it can accumulate further. This strategy requires discipline in implementation, but if you stick to it, you could save a lot of money without jeopardizing your finances.
There are many ways to lower the insurance premium for your car, from good driving habits to swapping the sports car for a modest sedan. But if you want to quickly reduce the amount you pay, nothing is more effective than increasing your deductible. The steps above can help you increase your excess in a safe and predictable way, giving you the protection you need at a price you can afford.