How much can I save on car insurance by increasing my deductible?

Prices are rising on pretty much everything, including insurance. That being said, there are many different ways to save on auto insurance, including increasing your deductible.

While this can lower your premium, if you need to make an insurance claim it’ll involve you paying more out of pocket. Wondering how much raising your deductible could save you and whether it’s worth potentially having higher expenses after a claim? We’ve got all the info you need.

A deductible is the portion of an insurance claim, that you, as the policyholder, are assuming responsibility for in the event of an at-fault accident. Your deductible is listed in your insurance policy, and this is the dollar amount that you agree to pay as part of the claims process.

In auto insurance specifically, deductibles can apply to multiple types of coverage. 

Higher deductibles usually apply to optional coverages. While uninsured motorist coverage technically has a deductible, it’s fixed at $300 and that can’t be changed.  

Now that direct compensation-property damage (DC-PD) is optional, drivers can also choose to add a deductible. However, insurance brokers typically advise against this since DC-PD applies in not-at-fault claims, and drivers could be stuck paying a deductible even when an accident wasn’t their fault. 

A higher deductible usually means a lower premium. This is because raising your deductible increases your percentage of financial risk, thereby lowering your insurer’s.

The relationship isn’t proportional though, so increasing your deductible from $500 to $1,000 doesn’t mean your rates will decrease by $500 a year.

To demonstrate the impact that increasing your deductible can have on your rates, we ran insurance quotes for a fictional driver using different deductibles ranging from $500 – $4,000 for collision and comprehensive coverage.

Our fictional driver is Dean, a 39-year-old, married male who lives in Scarborough, Ontario. He drives a 2020 Volkswagen Tiguan and has a clean driving record with no claims or tickets. He has collision and comprehensive insurance on his policy.

Looking at the average premiums above, increasing his deductible from $500 to $4,000 could save Dean 10% on his collision and comprehensive coverage. This figures jumps to 13% if his policy was with SGI.

It’s more common for drivers to increase their deductible from $500 to $1,000 or even $1,500 as opposed to $4,000. Using the average premiums from the chart, raising his deductible to $1,000 would save Dean 3% on his collision and comprehensive coverage. Going up to a $1,500 deductible would result in 5% savings.

While increasing your deductible will lower your premium, it does come with some risks. Mainly, you having to pay the higher deductible amount if you make a claim. 

For Dean, the biggest savings he saw were from raising his collision and comprehensive deductible from $500 to $4,000. While this netted him a few hundred dollars in savings, it would cost him $3,500 more if he had to submit an auto insurance claim.

Having multiple claims could cause your premium to increase. We suggest speaking with an insurance broker to get advice on the best course of action if you need to make a claim.

Having a higher deductible might deter you from making a claim altogether. If you had an accident and the repairs were estimated to cost $1,000, but you had a $1,500 deductible, then it wouldn’t make financial sense to use your insurance.

Auto accidents are uncertain, so it’s important to talk with an insurance broker before choosing to increase your deductible. You never know what might happen.

As an insurance brokerage, we love helping people save on their coverage. But we also see firsthand what happens when they can’t afford higher deductibles after a claim.

We’ve had instances where clients can’t afford to pay their deductible, and so they can’t get their vehicles repaired after an accident, said Mitch Claims Specialist, Jesica Ryzynski. Or their car was fixed, and they need to pay the deductible to get it released, but they don’t have the money so they can’t pick it up.

So, they might of saved $100 for a year or two, but it ended up costing them more in the long run and created problems because they can’t afford that higher deductible.

This is one reason why it’s important to not raise your deductible to a dollar amount that’s higher than you can afford. Make sure it’s always set to a level you can comfortably manage in case of an accident.

Want to learn more about deductibles and find out if raising yours makes sense for you? Give us a call at 1-800-731-2228. Our team of insurance brokers are always happy to provide free advice and tips to help you get the most from your coverage.