How are you going to pay your insurance deductible?

Unfortunately, most Americans have less than $1,000 in savings, according to a survey by Google Consumer Survey for personal finance website GOBankingRates.

Many will read “insurance deductible” and immediately think about their health insurance.

That’s not where I’m going here. I’m talking about your car and home insurance. But, the principle is the same.

Think of your savings account as your emergency fund. This emergency fund should be a part of your insurance plan. It’s a truism to say if you fail to plan, you have planned to fail.

But it doesn’t have to be that way…

You see, health insurance deductibles have to be paid by you before the insurance company will start paying on your claim. As the Affordable Care Act has evolved, the deductibles have become quite high compared to what they were in the past. Most people are having to figure out how to budget these costs into their already tight finances.

Car and home insurance deductibles are completely different. In these claims an assessment is made of what it will cost to make the repairs, then the insurance company subtracts that deductible from that amount, and you get the difference. If you have enough money in your emergency fund to cover the deductible, you can make the repairs immediately. If not, well, you wait.

Some would say, “I don’t have any money left over to save.” Let’s just say that’s true.

How about using your insurance plan to get the extra money to save? Here’s how you do it.

  • Increase the deductible you are carrying on your car and/or home insurance. This will reduce your premium.
  • Take the money you save and put it into a savings account.

Don’t like that idea? Be creative. The Get Rich Slowly website has interesting ideas.

Most people that own cars have, at least some, expendable income. So, let’s take advantage of the statistics the insurance companies already know.

For example, most car accidents are fender benders, not total losses. Many people carry low deductibles because they have a fear that their next car wreck will total their car. So, they pay higher premiums for these lower deductibles for years but have no claims.

Your deductible is part of your insurance plan. As consumers, we need to use this to our advantage. Having a healthy savings account will allow you the freedom to carry higher deductibles and save on your insurance premiums while still being financially prepared for the cost of a claim.

The use of credit cards has unfortunately taken the place of people building up a savings account. There are times where a credit card is a great solution for a purchase. But I think most people would agree that paying for something up front is always better than making payments. If you will pay yourself to build a savings account, you can start a habit that will give you more and more financial options in the future.

The information contained in this page is provided for general informational purposes only. The information is not meant as professional or expert advice, and any reliance you place on such information is therefore strictly at your own risk.

 

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