How Much Can You Save by Raising Your Car Insurance Deductible? – Forbes Advisor

Today’s rising costs force many of us to review our spending. And while some items, like unused subscriptions, can be removed from our budgets, necessities like car insurance are here to stay. But you may be able to cut costs by increasing your auto insurance deductible. how much can you save? We look at auto insurance rates to find out.

what is a car insurance deductible and how does it affect costs?

An auto insurance deductible is the amount of money your auto insurance company will deduct from a claim check. Auto insurance deductibles are most commonly associated with comprehensive and collision insurance.

Reading: How much deductible on car insurance

You choose your deductible amount when you buy an auto insurance policy. deductible options typically range from $250 to $2,000, with $500 representing the most common deductible option.

A lower deductible, like $250 or $500, will mean higher car insurance rates. That’s because the lower the deductible, the more your auto insurance company will have to pay if you file a claim.

For example, let’s say you cause an accident that results in $4,000 in damage to your car. You have collision insurance with a $500 deductible, so your auto insurance claim payment would be $3,500. If you had a $2,000 deductible, your insurance company would only pay $2,000 on the same claim.

average car insurance cost by deductible

How much can you save by increasing your auto insurance deductible?

drivers who increase their deductibles can save between 7% and 28% a year on average, according to a forbes advisor analysis of auto insurance deductibles and rates.

The biggest savings are often available to drivers who make a substantial change in their deductible, such as going from $250 to $2,000. the actual amount you save depends primarily on your current deductible, your new deductible, and your auto insurance company.

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company savings from increasing car insurance deductible

How much you’ll save by raising your auto insurance deductible also depends on your insurance company. Our analysis shows that drivers who choose Allstate save the most when they raise their deductibles. usa customers uu. and the whole country save the least.

average amount saved by raising a $500 deductible

These examples show why it’s wise to price savings at different deductible levels before moving to a higher deductible amount. For example, with USAA, you can save $145 by increasing your deductible from $500 to $1,000. or $149 if you go from $500 to a $2,000 deductible. an additional $4 savings on your annual fees is not worth the additional $1,000 financial responsibility if you had an auto insurance claim.

Is it a good idea to increase your car insurance deductible?

Increasing your auto insurance deductible can help you save several hundred dollars on your annual insurance costs. here are some things to consider before making a change.

can you afford the new deductible?

If you damage your vehicle, could you comfortably cover a higher deductible?

If the answer is yes, raising your deductible can help you unlock some savings. If the answer is no, the money you save may not be worth the financial hardship that could arise after an accident claim.

need instant savings on auto insurance?

Increasing costs can make it harder to cover essential bills, including car insurance. the alternative, not having auto insurance, can leave you vulnerable to substantial costs and is illegal in most states.

See also: How much to add a teenager to car insurance

If raising your auto insurance deductible will help you maintain auto insurance coverage or manage other necessary household bills, it’s worth considering.

Is the reward worth the risk?

Based on our analysis of auto insurance deductibles, raising a deductible from $500 to $1,500 can save you an average of $278 a year. but your financial obligation after a claim will increase by $1,000.

If you make a collision or comprehensive claim within the first 3.5 years of increasing your deductible, your initial savings will be wiped out by the higher deductible. however, if you don’t file claims for more than 3.5 years, your decision to increase your deductible will begin to pay off.

The following table illustrates how many years you would need to go without a claim before your annual savings exceed the increase in your financial responsibility if you file a claim.

number of years to pay a higher deductible if you don’t have a claim

Increasing a deductible is a risk analysis exercise for many drivers. For example, good drivers who spend a limited amount of time on the road are less likely to be in an accident, so a higher deductible carries less risk.

other ways to save on car insurance

Increasing your auto insurance deductible isn’t the only way to save. Consider these additional strategies:

  • look for quotes. The cost of coverage, even of the same type and amount, can vary dramatically between auto insurance companies. It’s a good idea to compare auto insurance quotes from multiple insurance companies. Don’t trust insurance company advertisements claiming to offer savings.
  • insurance policy packages. Most auto insurance companies reward customers who purchase more than one type of policy. Combining home and auto insurance can be one of the biggest discounts you can get. You can also typically bundle renters, condo, and other types of insurance.
  • look for discounts. Car insurance companies offer a variety of discounts, including those that insure multiple vehicles and are good drivers. discounts are usually applied automatically when you qualify, but ask your insurance agent for a review of the discount. For example, if you have a teenage driver who gets good grades, your company may offer a nice student discount.
  • methodology

    We used data from Quadrant Information Services to analyze the average rates for a good driver with auto insurance deductibles of $250, $500, $1,000, $1,500, and $2,000. rates are based on full coverage auto insurance (100/300/100 liability coverage, uninsured motorist coverage, and collision and comprehensive insurance) for a 30-year-old female driver with a good driving record.

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    frequently asked questions