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Saving a Bunch on Car Insurance Could Be as Easy as Increasing the Deductible

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author photo by Russ Heaps March 2016

Increasing your car insurance deductible can mean some serious savings when its comes time to pay the premium.

Your car insurance premium has a lot of moving parts that affect how much you will pay each year for coverage. Where you live, how much you drive, when you drive, your driving record, age and marital status are just some of the variables insurance companies consider when determining your premium.

Let's face it, we don't have much impact on many factors, like age, and only minor influence over others. But one variable that we do control is the amount of the deductible. Although it is only one of many factors influencing your premium, increasing the deductible can trigger significant cost savings, according to a study commissioned by InsuranceQuotes.com.

What Is a Deductible?

In the eyes of an insurance provider, the deductible is the amount you, the insured, must pay out of pocket for a claim before the insurance company's responsibility begins. If your deductible is $500, and you have an accident resulting in $3,000 in damage to your vehicle, you would pay the first $500. Your insurance company would pay the $2,500 balance.

Which Claims Have Deductibles?

Deductibles only apply to the collision and comprehensive portions of your insurance policy. Collision includes damage to your car in a crash. Comprehensive covers damage to your car by other means, such as a falling tree limb. There is a third portion of your policy for liability. It pays for the damage to another person's car if you are at fault. There is no deductible for liability claims.

Why Does the Deductible Affect the Premium?

Insurance companies like the idea of the insured being responsible for a larger portion of a claim. The higher the deductible, the less likely the insured will file smaller claims. If the deductible is $500, you are more likely to file with your insurance company for the balance of a $3,000 claim than if the deductible is $2,000. And, even if you do file, obviously the insurance provider's share is much less.

How Much Could You Save?

The study looked at collision and comprehensive rates across the country, comparing them using various deductible amounts. According to its findings, the average savings for increasing the deductible from $250 to $500 is 7 percent. Raising it from $250 to $1,000 will save on the average 9 percent. On average, you can take a 16 percent bite out of your premium by increasing it from $500 to $2,000! These are national averages. You might save more or less depending on your insurance provider, as well as the state in which you live.

Which States Offer Most and Least Savings?

When it comes to the impact changing the deductible has on the premium, location matters. Because of state regulations, the savings can be huge in certain states, but less significant in others. As a basis for comparison, InsuranceQuotes.com ranked the states for the average savings percentage when boosting the deductible from $500 to $1,000.

5 States With Highest Savings:

Massachusetts 19.2 percent

South Dakota 14.3 percent

Kansas 13.4 percent

Wyoming 13.1 percent

Iowa 13.0 percent

5 States With Lowest Sa1vings:

Michigan 3.9 percent

Florida 4.7 percent

Louisiana 5.9 percent

North Carolina 6.4 percent

Nevada 6.4 percent

What It Means to You: Think of insurance as a tool to cover the costs of those occasional, unexpected major calamities that you can't afford to pay out of pocket. Whether it's your home, health or car insurance, the larger the deductible, the less the insurance costs. Minimizing the premium by maximizing the deductible to the most you can afford makes sense.

This image is a stock photo and is not an exact representation of any vehicle offered for sale. Advertised vehicles of this model may have styling, trim levels, colors and optional equipment that differ from the stock photo.
Saving a Bunch on Car Insurance Could Be as Easy as Increasing the Deductible - Autotrader