Switching Car Insurance Firms, But Considering One Thing First — And I Need Your Opinion

by Kevin on March 24, 2009

I’ve had a recent rush of motivation to save money on things we pay for on a monthly, semi-annual, and annual basis. I’ve already cut $175 off of our TV bill for the next year. Cha-ching!

This time I moved on to car insurance. Currently we are insured with Geico. We switched to them from Allstate — we literally saved hundreds of dollars per year with the switch. Chalk one up for Geico. We also had a great experience with the customer service department when we originally switched. Chalk two up for Geico.

Yet with this recent rush of motivation I decided to set my sights on this relative high expense. We pay roughly $1,400 per year in car insurance. No small amount of money. (And imagine how much we were paying before we switched to Geico!)

Getting a Car Insurance Quote

As motivated as I was I really didn’t want to spend hours upon hours tracking down agents and getting individualized quotes. Yup, even while motivated I was lazy.

I decided I would try out Progressive Direct’s online quoting system. I take most things with a grain of salt, but the ability to get a quote from the other insurance companies is a huge plus in convincing me to try out the system. Are the quotes from the other companies exactly correct? I don’t know. I am skeptical at best.

I ran the numbers and discovered — wow! — Progressive could save us a couple of hundred dollars on top of the savings we had received from Geico. The coverage was better as well. (More coverage and a cheaper price. Yes, you read that correctly.)

This alone was pretty much enough to make me switch. I called Geico to see if they could match it and they said unfortunately I was already getting their best price.

The only question left is how much of a deductible should we have?

How much should this cost me? (Photo by Dr. Keats)

Choosing a Car Insurance Deductible

This is the last piece of the equation and I am having a tough time working through it. Our current coverage was a $1,000 collision deductible on both vehicles. We chose it because we felt we were safe drivers and we had an emergency fund that could cover the deductible easily.

Both companies offer you the option of having different deductibles on your insurance. Here’s how the coverages could play out, and what our annual savings would be:

  • Deductibles the same as now — $1,000 per collision per car — saving $317 per year
  • Wife with lower deductible — $1,000 collision for me, $500 for her — saving $282 per year
  • Both of us with lower deductibles — $500 per collision each — saving $247 per year

Naturally I am inclined to get the maximum savings out of this at $317 per year. But is the risk worth it?

The difference between the top savings of $317 and the bottom of $247 is $70 per year. We’ll be saving an additional $70 per year to risk an additional $500 if we have an accident. If you divide $70 into $500 you get 7.14. That’s the number of years it would take us to recoup the extra deductible cost if we had to use it once. If we had to use it more than that the payback period would get ridiculously long.

So I’m stuck. I know we will at least save $247 with lower deductibles. What should we do? Stick with what we have and get the maximum savings? Or take it a little bit safer with lower deductibles. Help me decide — I need to purchase the policy soon! Leave a comment with your vote.

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