Mar 25 2008

Saving on car insurance: Our deductible


Our car insurance is up for renewal once again, and we’re shopping for quotes. Before I start looking at other companies, I’m tweaking the numbers with our current company (Geico) to make sure we’re not over-insured in some areas and under-insured in others. I’ll probably do several posts, focusing on one aspect at a time.

If we renewed the exact same policy, it would cost $400.70 for six months for the one car on our policy.

Here’s what we can expect if we change the deductibles.

Deductible $250 $500 $1,000
Comprehensive $31.10 $24.90 $20.70
Collision $219.80 $151.10 $137.40

Right now, we have $500 deductibles for each, and I think that’s where we’re going to stay. Increasing the deductible to $1,000 would save us $4.20 on comprehensive, and $13.70 on collision, for a total of $17.90 off our six-month premium. I’d rather spend that $17.90 and only have a $500 deductible, rather than save a few bucks with the possibility of paying $500 more when filing a claim. Our emergency fund isn’t beefy enough at this point to make me comfortable with a $1k deductible, especially when the savings are minimal.

We’re comfortable with a $500 deductible. Choosing this option saves us $6.20 on comprehensive and $68.70 on collision, for a total savings of $74.90 for a six-month policy. If we had to file a claim on a $250 deductible, that would be like paying $318.70 out of pocket ($250 + 68.70 premium). So, if we end up having to file a claim, the $250 deductible would be about $182 cheaper than it would be if we had a $500 deductible ($500 – $318).

Still, that’s a savings realized only if we file a claim. We don’t drive much, and that $500 deductible is a risk we’re comfortable taking (and paying) if we need to.

Note: I haven’t had much experience with car insurance. I haven’t had my own policy for long, so I’m still somewhat new to this whole process. I’m sharing these posts to give you an idea on what we’re considering with regard to car insurance. When changing your own policy, be sure to use your own numbers and take your own situation into consideration.

5 Responses to “Saving on car insurance: Our deductible”

  1. The math is a little fuzzy, and I never know how to make decisions about insurance stuff.

    The bit about “So, if we end up having to file a claim, the $250 deductible would be about $182 cheaper than it would be if we had a $500 deductible ” … this is true if you file a claim every 6 months. If not, the math changes…

    If you have a claim after a year:
    $250 + (68.70 premium x 2 payments) = $387.40 = A savings of $112.60

    If you file a claim every year and a half, the savings to be on the $250 deductible plan dwindles to about $44. If you file a claim less often than that, it’s actually more expensive to be on $250-deductible plan than the $500-deductible plan.

    The entire insurance industry is all about risk management, and we have to be too, as consumers of it. Also, we have to decide how much we’re willing to keep on hand in our emergency fund for when the claims do come about!

  2. Yeah, the math definitely is fuzzy.

    Also, if we file a claim, we can expect our overall insurance premium to go up. I don’t know how high we could expect it to rise.

    I like how you showed that in the long run, as long as you don’t need to file a claim, a higher deductible is cheaper.

    Thanks, as always, for your insightful comments!

  3. The math shouldn’t have to be fuzzy, I just haven’t come up with a good way to really determine what the numbers should be. I know this much, my truck is ten years old and paid off. I don’t have full coverage. If I’d take the amount saved between collision and full coverage and put that in a fund, I’d be able to buy a new vehicle with cash eventually. Basically, some cars aren’t worth full coverage.

    I think part of determining that line is your personal capability to repair the darn thing. I’m pretty good at that stuff, so I don’t mind the keeping an older truck running right.

  4. Have you shopped around on price–when we looked around we found AIG to be cheaper–but we live in a very very very expensive car insurance state (WV). I have lived in two other states CT and MD and everytime I moved my insurance dropped nearly in half, and then it went down even more. Then I moved back to WV and it doubled! The guy warned me and I was like “yep, I know it’s gonna be high”

    Anyhow, make sure you shop around, rates can vary. I know we looked at Geico, Esurance, Statefarm, Allstate, and ended up using AIG –they were the cheapest for us, with the same coverages and same deductibles.

  5. There are also some options to look at for liability.

    I reduced my liability coverage to the minimum and then added an Umbrella policy. The separate policy gives me much greater protection than auto liability, plus it covers me for liability in non-auto incidents.

    Umbrella liability coverage is also fairly inexpensive. So now I have more coverage than with just higher liability in auto for probably about the same money.

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Hey! I'm Kacie, wife and mother of 3. I write about my family's finance: how we save money, improve our spending, and plan for the future.

I hope I can inspire and encourage you to improve your situation. See disclosure.

I'm adopting a much slower-paced posting schedule, and treating this as a hobby blog now.

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