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 insuranceQuotes.com. 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, insuranceQuotes.com.

“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 NerdWallet.com. 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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