Last week, I unfortunately ended up denting my car’s driver’s side by crashing into a wall. Despite my regrettable driving mishap, this marks the first time in my nearly 13 years of driving that I’ve had to file an auto insurance claim.
In the previous year, we had made a conscious decision to increase our car insurance deductibles from $500 to $1,000 in an attempt to be more cost-effective. Given that we seldom needed to make an insurance claim, we thought that boosting our deductible to $1,000 would lead to significant savings. However, this preconceived plan fails when an accident leads to the necessity of filing an insurance claim.
After the incident, I informed my husband about it, filled with distress. The thoughts of dipping into our hard-earned savings for a $1,000 payment, resulting from my own negligence, was disheartening. However, upon regaining my composure, I reassured myself that maintaining a $1,000 auto insurance deductible was still the logical decision. Here’s why:
Assuming the damage I had inflicted on the car amounted to a repair cost of about $700, I would choose to cover the expense personally to avoid a subsequent increase in my car insurance premium. Quite often, many of us decide against claiming insurance to prevent an escalation in auto insurance rates. Thus, in principle, the $1,000 deductible makes a logical sense, considering that any damages costing less wouldn’t likely result in an insurance claim.
A balanced deductible of $1,000 ensures manageable damage costs without significantly denting savings, but large enough to justify an insurance claim if necessary. If we’re already choosing to pay out-of-pocket for expenses up to $1,000 to avoid increasing insurance premiums, it is sensible to save on the premiums through a higher deductible.
The critical aspect is to ensure having $1,000 available in savings as a safety buffer for any required insurance claim payments. Recently, when reviewing my father’s auto insurance policy, which had a $250 deductible, I asked him when he had ever filed a $250 claim. He never had, since he would likely cover any damage costs between $1 to even $700 out-of-pocket rather than risking a premium hike.
So, the ideal strategy is to stack $1,000 in savings, cut down on the premiums, and practice safe driving to truly economize. As for me, I’ve switched to cycling for my commute to work.
