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Today’s rising costs are forcing many of us to revisit our expenses. And while some items, like unused subscriptions, can be slashed from our budgets, necessities like car insurance are here to stay. But you may be able to reduce costs by raising your car insurance deductible. How much can you save? We analyzed car insurance rates to find out.
What Is a Car Insurance Deductible and How Does it Impact Costs?
A car 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 collision and comprehensive insurance.
You choose your deductible amount when you buy a car insurance policy. Deductible choices typically range from $250 to $2,000, with $500 representing the most common deductible choice.
A lower deductible—such as $250 or $500—will mean higher auto insurance rates. That’s because the lower the deductible, the more your car insurance company will need to pay out if you make a claim.
For instance, say 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 claim payout would be $3,500. If you had a $2,000 deductible instead, your insurance company would only pay out $2,000 on the same claim.
Average car insurance costs by deductible
How Much Can You Save by Increasing Your Car Insurance Deductible?
Drivers who increase their deductibles can save between 7% to 28% a year on average, according to a Forbes Advisor analysis of car insurance deductibles and rates.
The biggest savings are typically available to drivers who make a substantial change to their deductible, such as jumping from $250 to $2,000. The actual amount you save primarily depends on your current deductible, your new deductible and your auto insurance company.
Savings by Company for Increasing a Car Insurance Deductible
How much you’ll save by raising your car insurance deductible also depends on your insurance company. Our analysis shows that drivers who choose Allstate stand to save the most when they raise their deductibles. Nationwide and USAA customers save the least.
Average amount saved by increasing a $500 deductible
These examples show why it’s wise to price out the savings at different deductible levels before changing to a higher deductible amount. For instance, with USAA, you can save $145 by raising your deductible from $500 to $1,000. Or $149 if you go from $500 up to a $2,000 deductible. An extra $4 in savings on your annual rates isn’t worth the financial responsibility of an additional $1,000 if you had a car insurance claim.
Is Raising a Car Insurance Deductible a Good Idea?
Raising your car insurance deductible can potentially help you shave several hundred dollars off your annual insurance costs. Here are some things to consider before you make 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, then increasing your deductible can help you unlock some savings. If the answer is no, then the money you save may not be worth the financial hardships that would potentially follow an accident claim.
Do you need immediate auto insurance savings?
Rising costs can make it challenging 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.
If raising your car insurance deductible will help you keep car insurance coverage or manage other necessary household bills, it’s worth considering.
Is the risk worth the reward?
Based on our analysis of auto insurance deductibles, increasing a $500 deductible to a $1,500 deductible 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 bumping up your deductible, your upfront savings will be negated by the higher deductible. If you go claims free for more than 3.5 years, however, your decision to increase your deductible will begin to pay off.
The table below illustrates how many years you’d need to go without a claim before your annual savings exceed the increase in your financial responsibility if you make a claim.
Number of years for higher deductible to pay off if you don’t have a claim
Raising a deductible is an exercise in risk analysis for many drivers. For example, good drivers who spend a limited amount of time on the road are less likely to get into an accident, so a higher deductible has less risk.
Other Ways to Save on Car Insurance
Raising your car insurance deductible isn’t the only way to save. Consider these additional strategies:
- Shop around for quotes. The cost of coverage—even the same type and amount—can vary drastically among car insurance companies. It’s a good idea to compare car insurance quotes from multiple insurance companies. Don’t trust in insurance company ads that claim to offer savings.
- Bundle insurance policies. Most auto insurance companies reward customers who purchase more than one type of policy. Bundling 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 range of discounts, including ones for insuring multiple vehicles and being a good driver. Discounts are generally automatically applied when you qualify, but ask your insurance agent for a discount review. For example, if you have a teen driver who gets good grades, your company may offer a good student discount.
Methodology
We used data from Quadrant Information Services to analyze average rates for a good driver with $250, $500, $1,000, $1,500 and $2,000 car insurance deductibles. Rates are based on full coverage auto insurance (liability coverage of 100/300/100, uninsured motorist coverage and collision and comprehensive insurance) for a 30-year-old female driver with a good driving record.
Frequently Asked Questions
Can you increase your car insurance deductible?
In most cases, you can increase or decrease your car insurance deductible at any point during your policy term. However, there are some exceptions:
- You can’t lower your deductible for an accident that has already happened. For example, if you hit a pole in a parking lot and need to make a collision claim, you can’t change your deductible for that claim.
- You change a deductible if your area is under a named storm warning or watch. Restrictions on car insurance policy changes go into effect during this time and usually prevent you from making changes, such as adding coverage or changing a deductible
What types of car insurance have a deductible?
Collision and comprehensive insurance are the most common types of coverage that carry a deductible.
Depending on where you live, other types of car insurance, like personal injury protection and uninsured motorist coverage for property damage, may have a deductible. For instance, Florida car insurance companies must offer consumers PIP coverage with the option to choose a $250, $500 or $1,000 deductible.
Liability car insurance, which is required in most states, does not have a deductible.
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