Lower auto insurance by raising deductible, how does it work?

According to a recent study, the most effective way to decrease auto insurance is strengthening your deductible’s policy. 

How to strengthen your deductible’s policy?

Commissioned by insuaranceQuotes, the Quadrant Information services did, in their latest study, investigate the impact of deductible’s policy that the owner pays out of their pocket with the amount of insurance expense. For example, a good credit 45 years old female driver can decrease her auto insurance premium after raising her relative deductible expense.


Based on data for NAIC (National Association of Insurance Commissioner), a U.S driver pays an average $850 for his annual car insurance premium (with an average deductible of $500). However, if you double your deductible to $1000, and you will save your insurance expense by $70 on average (which is 9% of saving accurately). The saving proportion will be 15% (equivalent to $130) if the deductible is raised up to $2000.

Unfortunately, the positive increase is not for everyone! The deductible is the amount of expense charged to you when you file a crash. Only if you can afford the out-of-pocket money when you have to file a claim, so the above solution of saving works. It makes non-sense if you save $100 a year but stuck yourself in another $500 repair bill.

Revising your insurance’s portfolio!

Here are four important questions that you should answer before signing in any auto insurance’s file.

Question 1: How much can you pay for a crash?

If you are able to pay for emergency spending (in that case is car crash), it is a great deal for you to raising deductible and benefit from the saving proportion. But if you have less money on hand, think carefully about raising your deductible’s policy, it is no longer a benefit, but a risk you bear.

Question 2: Are you careful with the math?

You need to know exactly how much you going to save with a higher deductible and determine whether this saving is sustainable to make a change or not! Do not completely rely on a particular insurance broker, do the math yourself to figure out is it worth an investment for a higher deductible. Recheck your available cash on hand, the amount of insurance fee, the condition of transport in your state and your driving ability as well.

Question 3: What will you do with the extra?

Don’t let the money stay for nothing. If you just let these extras absorbed in a bank account, it makes non-sense to invest in a higher deductible expense. Make a plan for spending or investing wisely and the final amount of money you earn at last will be much higher.

Question 4: Are you ready to take the risk?

After all, there is no absolutely good thing. It is more likely an investment than just a saving. Review carefully every factor affects your driving plan. You might be a good driver but your road-mates are not. The reckless potentials may make an influence on your insurance’s profile.

How can increasing deductible affect your car insurance premium?

Indeed, increasing deductible means you are telling the insurance company that you are willing (and able) to pay for a claim. For example, you have a $1000 deductible’s policy and file a crash which caused $2000 repairing fee, then the insurance company will cover half of the bill for you. The policy is a factor that identifies how risky your insurance’s policy is, as well as how much you can accept to pay when filing a crash. A higher deductible means the risker the driver willing to take and the lesser the insurance company have to bear.

Consequently, the higher deductible you willing to pay, the lesser claims you likely to claim. And, as the results, based on this positive attitude, the insurance is more willing to reduce your insurance premium.

How much can you save when increasing your auto deductible?

The answer is depending on which state you stay. The highest saving proportion is 17%, recorded in Massachusetts’s research. Michigan’s drivers save average 4%, marked as the lowest saving proportion with the same increase of deductible from $500 to $1000.

However, the lower saving rate doesn’t mean the most money saved. It also depends on how much insurance fee you pay, based on which state you drive in. The South Dakota’s drivers only save $150 on average, which is lower than the amount of $200 that Massachusetts’s drivers save in the same amount of deductible expense. But the average insurance cost in South Dakota is much lower than in Massachusetts.

As mentioned before, there is no absolutely good deal as well as one formula for calculating the benefit. It is up to you to review all possible risks on your plan. The best fit insurance’s solution is calculated particularly on your own driving factors.

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