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Today’s rising costs are forcing many of us to reevaluate our spending. And while some things, like unused registrations, can be cut from our budget, essentials like car insurance are here. But you can reduce costs by raising your car insurance deductible. How much money can you save? We analyzed car insurance rates to find out.
What Is Car Insurance And How Does It Affect Money?
The car insurance deductible is the amount of money your car insurance company will deduct from your check. Auto insurance deductibles are often associated with collision and comprehensive insurance.
You choose your deductible when you buy a car insurance policy. Discount options usually range from $250 to $2,000, with $500 representing the most popular option.
A small discount – such as $250 or $500 – will mean more car insurance. That’s because the lower the deductible, the more your car insurance company will pay if you claim.
For example, let’s say you cause an accident that leads to $4,000 in damages to your car. You have collision insurance with a $500 deductible, so your car insurance premium would be $3,500. If you have a $2,000 claim instead, your insurance company will only pay $2,000 of that claim.
Average car insurance rates and deductibles
How Much Money Can You Save By Increasing Your Car Insurance Deductible?
Drivers who maximize their income can save between 7% and 28% annually on average, according to a Forbes Advisor study of car insurance quotes and rates.
The biggest savings are available to drivers who make significant changes to their deductible, such as jumping from $250 to $2,000. The exact amount you save depends on your deductible, your new deductible and your auto insurance company.
Savings with the company’s top-up car insurance policy
How to save on upgrading your car insurance depends on your insurance company. Our analysis shows that drivers who choose Allstate stand to save significantly when they raise their premiums. International customers with USAA save less.
Average money saved by adding a $500 deductible
These examples show why it’s smart to trade your savings for different deductible levels before switching to a lower-cost plan. For example, with USAA, you can save $145 by raising your balance from $500 to $1,000. Or $149 if you go from $500 to $2,000 deductible. An extra $4 in your annual premiums should not amount to an extra $1,000 in car insurance premiums.
Is Upgrading Your Car Insurance A Good Idea?
Raising your car insurance deductible can help you shave several hundred dollars off your insurance costs per year. Here are some things to consider before making the switch.
Can you get a new discount?
If you wreck your car, can you get a higher deductible?
If the answer is yes, then increasing your deductible can help you unlock more savings. If the answer is no, then your savings will not be the financial stress that can follow an accident.
Do you need car insurance quotes right away?
High costs can make it difficult to pay important bills, including car insurance. The alternative—not having auto insurance—can leave you at risk for a lot of money and is illegal in many states.
If raising your car insurance deductible will help you save on car insurance or take care of other household expenses, it’s worth considering.
Is the risk worth it?
Based on our analysis of insurance deductibles, increasing your $500 deductible to a $1,500 deductible would save you about $278 a year. But your financial responsibility after interest will increase by $1,000.
If you make a collision or a full claim within the first 3.5 years of your repayment, the amount you have saved up front will be rejected with a large deduction. If you go claim-free for more than 3.5 years, however, your decision to increase your premiums will begin to pay off.
The table below shows how many years you’ll need to go interest-free before your annual savings exceed the amount of your financial responsibility if you pay off.
Number of years of maximum deductible to pay if you have no claim
Raising your deductible is a risk assessment task for many drivers. For example, good drivers who spend less time on the road are less likely to get into an accident, so the cheaper premiums have less risk.
Other Ways to Save on Car Insurance
Raising your car insurance deductible is not the only way to save. Consider these additional options:
- Shop around for specials. The cost of coverage – even the same type and amount – can vary greatly between car insurance companies. It is a good idea to compare car insurance quotes from several insurance companies. Don’t believe insurance company ads that claim to save you money.
- Insurance premiums. Many car insurance companies offer rewards to customers who purchase more than one model. Combining home and auto insurance can be the biggest discount you can get. You can also collect renters, condo and other types of insurance.
- Look for discounts. Car insurance companies offer several discounts, including multiple car insurance policy and being a good driver. Discounts are usually only applied when you qualify, but ask your insurance agent to check for you. For example, if you have a young driver who earns well, your company may offer you a student discount.
We used data from Quadrant Information Services to analyze average prices for a good driver with $250, $500, $1,000, $1,500 and $2,000 worth of car insurance. Prices are based on comprehensive auto insurance (100/300/100 coverage, uninsured motorist coverage and collision coverage and comprehensive insurance) for a 30-year-old female driver with a good driving record.
Frequently Asked Questions
Can you upgrade your car insurance?
In most cases, you can increase or decrease your car insurance at any time during your term. However, there are exceptions:
- You cannot lower your premiums because of an accident that has already occurred. For example, if you hit a tree in a parking lot and need to report a collision, you may not be able to change your premiums.
- You change your deductible if your area is under a hurricane warning or watch. Restrictions on auto insurance changes come into effect at this point and often prevent you from making changes, such as adding coverage or changing your deductible.
What types of auto insurance have a deductible?
Collision and comprehensive insurance are the most common types that carry a deductible.
Depending on where you live, some types of auto insurance, such as personal injury coverage and uninsured motorist coverage for property damage, may have a deductible. For example, Florida auto insurance companies must offer consumers PIP coverage with a choice of $250, $500 or $1,000 deductible.
Car insurance, which is required in most states, does not have a deductible.