A deductible is the amount of money which the insured must pay before the insurance company’s payout begins.

Insurance companies include a deductible in their auto insurance policies to avoid paying out on relatively small claims. This is only practical as the administrative time and cost of small claims far outweigh the benefits of payout.

For example, a typical auto insurance policy may carry about $500 deductible. If the car owner gets into an accident, he has to foot the first $500 of the damage while the rest of the cost is borne by his insurer.

The amount of deductible (partly) determines the auto insurance premiums charged by the insurers. If you want lower premium payments, you’ll have to agree to a higher deductible, and vice versa. It’s possible for the deductible to go even as low as $0 – as such the policyholder has to pay much higher premiums.

If you’re a safe driver and can foresee that accidents never (or rarely) occur, a very high deductible can be advantageous to you.

When shopping for affordable auto insurance, be sure to ask specific questions about the deductible. An unusually low premium rate may be due to an equally high deductible amount. You’ll ultimately need to find a right balance between affordable premiums and a reasonable deductible when buying auto insurance for yourself.

You can reduce your car insurance premiums over the long term if you know how the car insurers are charging you. By giving them what they want, chances are your car insurance will experience a decline year after year.

Car insurance companies charge you premiums based (partly) on the number of accidents in the area you live. This seems fair – at least it is from a statistical standpoint. No matter how safe and skillful of a driver you are, the chance of getting into an accident increase when the area itself is not as safe. And the area where you live is where you’ll drive almost everyday.

Other factors that affect your car insurance premiums are your age, driving record and even occupation. For drivers under 25 years old, examination results also influence car insurance premiums.

Then there are also benefits including medical payments, liability, towing insurance, emergency roadside assistance, auto glass coverage, daily rental insurance, et cetera, that insurance companies will charge you for.

Therefore it’s important to know what you are paying for, and get car insurance quotes from different companies to compare if you can afford the time. Most drivers only pay more for car insurance just because they think that by spending more they are better protected - and therefore safer. Of course you know that this isn’t always true. The amount of coverage doesn’t always increase with the number of dollars you spend.

Some drivers don’t realize that they are paying out much more than necessary. And if you want to lower your car insurance premiums, you’ll have to access the amount of coverage you really need – and pay for no more than this.

Of course, being a safe driver really helps - your premiums will come down gradually. You won’t have to pay for repairs nor the deductible amount in the event of claims, and the money you save every month goes right in your pocket and can go towards other expenses.

If you need someone (or a computer) to analyze and compare the different quotes from various car insurance companies, you can always approach any online quote comparison service – any time.

Save some money, America

Auto insurance cost is one of the major cost drivers when you maintain your automobile. This is even more apparent if you happen to be involved with an automobile accident or have made some major claims with your insurer. Below are a few tips that you can consider to bring down your car insurance cost:

1. Lower your mileage

A low mileage discount will help, especially if you’re living in an urban area where you have easy access to the mass transit system. Otherwise you can also drive to the urban area to catch a transport and save yourself the headache of getting trapped in traffic jams. You can also carpool your way to work. Why not – this gives you a chance to network around for more work ideas and career opportunities too.

2. Raise your Deductible

You’ll get lower rates as you raise the deductible. Stretch it to the highest level you can afford in the event of claims - keep your deductible comfortably within reach though.

3. Get good grades in school

If you’re under 25 years of age, you’ll probably find yourself paying for your automobile insurance through the nose. A good student discount entitles you to shave 5% off your auto insurance bills. You have to maintain a grade point of B and above in order to qualify. Insurers believe that when a student maintains good grades, his sense of responsibility must have reached a certain level of maturity.

4. Compare quotes

You can reduce your auto insurance cost by as much as 40% when you compare quotes across different insurers in your area. You can either go to each individual insurer to ask for quotes – and spend hours filling in forms – or approach a quotes comparison service to do it for you. This option takes far less time. For more information on quotes comparison, visit Motor Insurance America. It takes 2 minutes to fill up this form.

There are more ways – many more ways - to save money on your automobile. I’ll write about these in future posts. You’ll be surprised at how easy these tips can be implemented straight away, regardless of your vehicle’s make and model.

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