Big Savings by Increasing Insurance Deductibles

The Detroit Bureau

Americans will drive a few miles out of their way to save a couple of cents per gallon on gas and fastidiously check the air pressure in their tires to improve mileage to save a buck or two, but many fail to take advantage of a simple way to save money: raise the deductible on their car insurance from $500 to $1,000.

Car owners save an average of 9% on their premiums with that change, according to The savings jump to 16% if they change it from $500 to $2,000. The changes do vary by state: Massachusetts gives the biggest break at 19% for making the $500 change while Michigan provides the smallest cut at just 4%.

“It’s very interesting to see that in some states raising your deductible gives you a huge savings and in others it barely moves the needle,” said Laura Adams, senior analyst,

“In some states, you can save hundreds of dollars each year by signing up for a higher deductible, but in others, the reward is so small that it doesn’t make sense to risk the higher deductible. This is a good reminder that doing a little research and knowing what’s available to you can really pay off in the long run.”

• Other states providing decent rate drops include :
South Dakota at 14%
Kansas, Wyoming and Iowa all at 13%.

• Running with Michigan at the bottom of the list are: 
Florida with just a 5% savings
Louisiana, North Carolina and Nevada at 6%.

The result for Michigan isn’t much of a surprise as the state has one of the average highest insurance premiums in the country. It’s not that Michigan drivers are so bad, but there are a few quirks that drive the prices up.

“Michigan is the only state where car insurance includes unlimited personal injury protection,” Adams said. “Also, Detroit has a very high percentage of uninsured motorists — as high as 50% by some estimates. That unfortunately raises rates for those who do have car insurance.”

Detroiters pay 165% more than the average driver in the U.S.: the highest rate in the nation and Grand Rapids, the state’s second-largest city, was third nationally, according to the website The National Association of Insurance Commissioners claims the average annual cost of car insurance nationwide was $797 in 2011, the most recent figures available.

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