How Deductibles Affect Car Insurance Rates
One of the best ways to save on your car insurance rates is to adjust your deductibles. Usually, how deductibles affect car insurance rates is that the higher your deductible, the lower your rate. In Florida, for example, an auto insurance deductible of $500 or $1,000 can save you an average of $1,140 to $1,320 over five years. Though increasing deductibles affects premium rates by reducing them, keep in mind that the savings may disappear if you have to make a claim or multiple claims.
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UPDATED: Jul 19, 2021
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Adjusting your deductible is a great way to save money on your car insurance premiums — potentially, that is.
How do deductibles affect car insurance rates?
The general rule is that the higher your deductible is for comprehensive and collision coverage auto insurance coverage, the lower your premiums will be. But there are some scenarios in which raising your deductible to get cheaper insurance rates could backfire and end up costing you more money. We’ll discuss some of those situations below, and also give you advice on how to choose the best deductible in order to get the most affordability from your policy.
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Potential savings for raising your deductible
As you know by now, when you raise your deductible (the amount of money you pay up front if your insurance company approves a claim filed against your comprehensive or collision coverage), your insurance company will reward you with a lower monthly premium. In the long run, if you keep a clean driving record, it can save you a bunch of money. You can see an example of this in the chart below.
Let’s use Florida from the chart as an example. As you can see, raising your deductible from $250 to $500 yields 14% percent savings; this could result in $1,140 in savings over 5 years. raising your deductible from $500 to $1,000 results in 16% percent savings, which puts $1,320 in your pocket over that same time span. Finally, jumping from a $1,000 deductible to a $2,000 deductible saves you 24%, which is a grand total of $1,973 in savings over five years.
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Juggling collision vs. comprehensive deductible adjustments
Make sure you take a good look at your policy before you decide how much you should adjust each deductible. Many people may never look at their insurance policy, and therefore being aware that your collision and your comprehensive deductible are two completely separate expenses. As such, they can be adjusted to different amounts.
The amount of your monthly premium that pays for your collision coverage is, on average, 450% more expensive than the amount of money that goes towards paying for your comprehensive coverage. Therefore, if you do decide to adjust your deductibles in order to save money, you’ll have to choose wisely in order to balance out the math. After all, a substantial raise in your comprehensive deductible won’t save you nearly as much as a slight increase in your collision coverage. It’s therefore important to balance the two in a way that saves you the most money.
The pros and cons of adjusting your deductibles
As much as every driver would like to save money, the reality is that the higher you raise your deductible, the more expensive of a gamble you are taking. After all, the savings stated above will only matter if you never have to file a claim.
Even if you are an excellent driver, you could always get unlucky and suffer comprehensive or collision damage at the hands of another driver. Regardless of who’s fault it is, you will still have to file a claim. And if your insurance approves that claim, you will have to pay your deductible first in order to get your vehicle back in working order. But if for whatever reason, you don’t have the funds to immediately pay it, you may be off the road for a significant amount of time. This could result in catastrophic hardship if your lack of transportation means that you cannot get to work, shop for groceries, pick up your kids from school, or any other situation which requires a personal vehicle in order to live a normal life.
Also, keep in mind that the average claim for an accident these days is around $3,500. Obviously, having a lower deductible means you can get back on the road more quickly for less money. But if you raise your deductible very high, your long-term savings on premiums could be significantly hindered — or canceled out entirely — by your decision. Again, let’s use Florida as an example:
|Deductible||Savings Over 5 Years||Total Savings After Filing Claim|
Of course, you don’t need to rely only on how much or little your deductible will cost to save money on your car insurance.
You can compare quotes from different companies quickly and easily in order to get a better deal on the right you’re currently paying. We have a FREE quote generator on this page that can get you started on your comparison shopping. just enter your ZIP code into the box, and you can find lower rates near you in a matter of minutes!