Last week, I accidentally dented my car’s driver’s side by hitting a wall. Despite this unfortunate incident, it’s actually the first time in my nearly 13 years of driving that I’ve needed to file an auto insurance claim.
Last year, we decided to increase our car insurance deductibles from $500 to $1,000 to save money. Since we rarely needed to make a claim, we figured having a higher deductible would lead to significant savings. But this plan falls apart when an accident forces us to file a claim.
I called my husband to inform him about the accident, feeling very upset. The thought of using $1,000 from our hard-earned savings because of my mistake was really upsetting. However, after calming down, I realized that sticking with a $1,000 deductible was still the right choice. Here’s why:
If the repair costs were around $700, I would rather pay it out of pocket to avoid raising our insurance premium. Many people choose not to make small claims to keep their rates from going up. So, having a $1,000 deductible makes sense because we likely wouldn’t claim any damages less than that amount.
A $1,000 deductible is a good balance; it’s high enough to save on premiums but manageable enough for out-of-pocket costs when needed. If we are already willing to cover up to $1,000 ourselves to avoid premium increases, it makes sense to save on the insurance costs with a higher deductible.
The key is to ensure we have $1,000 in savings set aside for any necessary claim payments. When I reviewed my father’s auto insurance policy, which had a $250 deductible, I asked him if he ever filed a $250 claim. He never did; he preferred paying out of pocket for any costs between $1 and $700 to avoid a premium hike.
So, the best strategy is to keep $1,000 in savings, lower the premiums, and drive safely to really save money. As for me, I’ve started cycling to work instead of driving.