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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