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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How We Saved $248 on Car Insurance with Equal Coverage
April 21, 2011 at 6:31 am

{ 12 comments }

Jason March 24, 2009 at 7:05 am

My wife and I are in the same stage as you are it appears. I haven’t had an accident in my life but my wife has had two although not for years. Assuming you have the emergency fund I would always go for saving more money on a monthly bases, or how ever you pay it. You can pay off other debt or invest and make that money grow.

Kelly March 24, 2009 at 7:13 am

Personally I would go with the higher deductible.
I also wouldn’t add extra coverage, I would keep the coverage the same as your last policy, and consider lowering it in certain categories.
I had a post recently on my site regarding auto insurance coverages.
We’re saving $700 this year (paying a little under $750 for the year for 2 cars) by reducing unnecessary coverages.

Kimberly March 24, 2009 at 7:15 am

$500 each – it’s not worth the jump to $1000 each just to save $70/year

This is “found” money for you anyway, which I know isn’t really a valid factor for an objective analysis but I do think is a valid consideration

You should probably know and consider my bias though – I don’t like (for me) to have deductibles more than $500, it just makes me more miserable during a claims process to fork out more than $500 (although I can well afford it). It’s sort of a personal threshold – Id need to be saving a bunch more than $70 a year to kick it to $1000.

Christina @ Northern Cheapskate March 24, 2009 at 7:16 am

I think figuring out insurance coverage is such a gamble.

Here’s what we found out:

http://www.northerncheapskate.com/2008/12/1000-insurance-question.html

Clear as mud, huh? 🙂

Kevin March 24, 2009 at 7:28 am

@Kelly: Thanks for the feedback. I am actually pleased we are getting higher coverage. I was a bit iffy on our last coverage (it was well above the minimums but not huge). There is significant risk to over-insure every part of our lives, and I buy that. But in this case I think it is worth it. I’ll check out your blog post though.

@Kimberly: Good point. I have been leaning toward the $500 simply because of the risk of using it more than once. If we had two wrecks the extra savings would be wiped out for (by my calculations) 14 years.

@Christina: Clear as mud indeed. Three deer wrecks in 10 years? Ouch!

Kate Kashman March 24, 2009 at 8:23 am

We choose higher deductibles, but not only to save money. Any claims that we make are going to affect our long term insurance situation. Having higher deductibles makes the decision not to claim a $3000 crunched bumper so much easier. In fact, we haven’t made a claim since we raised our deductibles to $1,000. Of course, I know that we’ve also been extraordinarily lucky, and both our vehicles have reached the point where their insurance value is pretty small. A decent crash will probably total either of them.

It is a tough decision, and I certainly can argue for both a higher or lower deductible. This is just where we ended up.

David Income March 24, 2009 at 12:28 pm

I can certainly see the case for going with the higher deductible, but for me personally, I would go with the $500 on both. Just because you get in a wreck that will cost $1000 to fix doesn’t mean that you have to take the claim on it – you could still just pay for it out of pocket and avoid the claim, but if you have a severe wreck, that’s $500 less than what you would need to come up with. This is especially important if, heaven forbid, the wreck exceeds the coverages.

Rather than take 7 years to save back the money you’d save, I’d take the savings at the $500 deductible and run…

also, just as a side note, if you know of an independent agent that you can talk to, sometimes that is much more cost effective than gathering the quotes yourself. They know the ins and outs of the business, and you may save a little bit by doing the legwork yourself, but I’m willing to let my agent do the work, and present their best option. Since you already have a quote in hand, you can make comparisons, but you never know what they’ll be able to do, especially if you have a friend or family member that is in the business…

Finance Nerd March 24, 2009 at 1:02 pm

One thing most people don’t realize is just how regulated insurance is. Companies must file their rates with the states, including all rating factors and variables.

So, when you ask for a discount, the only discount they can give you is one that is filed. That means it’s worth asking if there are additional discounts that you qualify for, but as far as them making you a “special” deal it just isn’t possible, unless the agent is unethical and signs you up for a discount you don’t qualify for.

I mention this because it lends some credibility to Progressive’s online price comparison. It is very simple for them to get a copy of their competitors’ filings and create a valid and accurate comparison, so there is no reason to suspect them of conning you.

One other note, Progressive doing this helps them in ways you might not realize unless you are a student of insurance. Sure, they could “stack the deck” and only provide comparisons they could beat, but they have a good reason not to do that. If another carrier has a better rate than them, their model is so powerful that they believe getting the other carrier to insure you will actually help them, because the other carrier will lose money on you. This weakens their competition, which helps them.

As to the deductible, if you can afford $1K, I would go with the higher one, but if you can’t afford it either financially or psychologically, go with the $500.

Jenn March 24, 2009 at 6:38 pm

I would go with the lower deductible unless you are 100% certain you can afford the $1,000 without any problems should an accident occur. Even if you and your wife are incredibly safe drivers, you never know what someone else is going to do, and even if they should have insurance, they may not, or if they hit you and take off (like what happened to me) it can take months to track them down. Going through an accident, especially if injuries or a totalled car is involved, is bad enough without worrying about a high deductible as well.

One other thing Progressive does (not sure of the requirement) is they provide “coupons” off the deductible. My deductible would have been $500 for my accident (this is before we tracked down the other driver), however, they offered me $100 off since I had been a good driver and long-term customer. At the time I paid $400 (had it deducted from the value of my totalled car), and then when they found the other driver Progressive helped with my reimbursement. It may be worth finding out if they would make that offer to you now as part of the switch, though hopefully you would never need to use it.

Sorry for the incredibly long post – using car insurance is a subject I am WAY too familiar with lately. I do have Progressive and they are wonderful, I would recommend them for the customer service alone.

Diane March 24, 2009 at 9:25 pm

I would go with the lower deductible. Since you’re already saving by changing companies, I think the extra $70 over a year is a worthwhile investment.

I’m also looking for cheaper insurance, since I’m adding a teenage son to my policy. I will check Geico to see if they can offer me a better price. I currently have State Farm, and when I checked Progressive this week it was TWICE the price for the same coverage!

Apparently Progressive does not want to insure teenage boys, although their quote for me alone was also higher than State Farm, and I have a perfect driving record. Go figure…

Kevin March 25, 2009 at 10:08 am

@Kate: Interesting point about not wanting to make a claim. I’ll take this into consideration…

@David Income: If the damages exceed the limit I doubt $500 extra in my pocket is going to save my skin.

@Finance Nerd: GREAT info. Thanks for the information. Seriously good stuff. Makes me feel better about Progressive’s other quotes.

@Jenn: We can definitely afford the $1000 deductible. Sounds like you’ve had a good experience with Progressive.

@Diane: Thanks for the vote!

PW March 25, 2009 at 10:38 am

Often if you have your house and car insured together on the same policy, you can get up to a 10% discount, if that is possible for you. I would choose the higher deductible.

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