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Auto Insurance Guide - How does deductibles affect auto owners insurance premium?

Updated on July 26, 2010

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This article covers the question, “How does deductibles affect auto owners insurance premium?” plus questions like factors that increase auto insurance premiums and how to reduce the cost of your auto insurance premium, so read on….

Auto insurance premium is the amount auto owners have to pay to their insurance company two times a year or in small installments agreed on paper annually.

The deductible is the amount of money auto owners agree to pay in order to file a claim covered by their policy.

Now lets take an example that after a car accident a car owner’s amount of claim costs around 1,500 dollars. If his/her deductible is 500 dollars, he/she has to pay the first 500 dollars and his/her insurer has to pay the remaining 1,000 dollars to fix his/her car. Moreover, if damage value is 500 dollars or less, the car owner has to pay all the cost, as these are less than his/her deductible, so if a car owner’s deductible is less, he/she will spend less money and the insurer will have to cover a greater part of share of the cost of repairs after an auto accident, so a lower deductible means that car owner’s premium will be more expensive to compensate for the increased coverage. Similarly, if a car owner’s deductible is up, his/her premium will fall.

What factors can increase my auto insurance premium?

There are many factors that can affect your auto insurance premium but there are some factors you can control and are in your hand and there are other factors that you do not have any control on. My advise for you is to focus on factors that you can control.

#1 Factor – Type of vehicle purchased

The vehicle a person drives affects his/her premium significantly because insurance premium for a sports car or a brand new car will cost more, so it is a good idea to investigate how much premium it costs for both new and used cars respectively before buying.

#2 Factor – How a vehicle is driven?

How you drive a vehicle also affects your premium for example if you have had many traffic challans or tickets or motor vehicle collisions in the past, your premium will probably cost more than an average cost. Opposite is the case for drivers who have had a few accidents if any. They will pay lower premiums and can qualify for additional discounts by the insurer or insurance company.

#3 Factor – Where you drive or where you live?

The third factor that affects your premium is where you drive or where you live. This factor also influences your premium cost significantly. If you are living in a locality or an area, which has high crime rates like theft or vandalism according to police records, that means your car, is at great risk and therefore the insurance company will charge you higher premiums.

#4 Factor – The distance you drive, less or more

The fourth factor that affects your car insurance premium is the distance you drive. Long distance costs more because every mile you will drive will increase the chances of having a car collision or accident. The best solutions for reducing your auto insurance premium is by reducing your overall miles by driving less and using public transport, cycling or doing carpool to go to workplace, etc.

The details of your policy directly affect the cost of premium you have to pay because while signing up the application for auto insurance, if you have checked in for low deductible, extra coverage, high coverage limit, and insurance for multiple drivers, it may increase the cost of your insurance premium.

Auto Insurance Guide - Get Online Auto Insurance Quotes Here.
Auto Insurance Guide - Get Online Auto Insurance Quotes Here.

How I can reduce the cost of my auto insurance premium?

The easiest and best way to reduce the cost of your auto insurance premium is by adjusting your policy according to your needs. For example, increasing your deductible or change what it covers the coverage or limits can lower your premium immediately, but it is best to talk with your auto insurance agent before making any modifications or changes in your policy, as it can affect your protection and vehicle security.

There are many online auto insurance providers who provide certain discounts for eligible insurance buyers, which helps the buyer in saving money. You just have to research online or directly with the insurance company before you are going to buy a new car or used car making sure that you end up with the best deal on auto insurance.

Although we have no control over our age, we have certain options that can lower our car insurance premiums for example a teenager or young adult who has acquired good grades while taking driving lessons enjoys more discounted rates than others. For senior citizens who take driving lessons and are 55 years of age or older are also eligible to receive a discount.

Via the hub above, I have provided small but useful tips to cover a part of auto insurance guide. I will publish more info in my upcoming hubs on how to buy auto insurance.  Once you are ready to purchase your auto insurance, do not forget to research before getting a quote online and before locating an auto insurance agent.


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    • profile image 5 years ago

      well there are auto policy deductible coverage available that can help ones to save up to 35% on overall auto policy cost.

    • cheapinsurancepg profile image

      cheapinsurancepg 6 years ago from Spokane, WA

      Good hub. Lots of good info, going to browse your other hubs. Thanks soni2006.

    • drjoeclassics profile image

      drjoeclassics 6 years ago

      I like this hub, it is in the niches I enjoy and Soni, well written, full of facts and helpful. Everybody is looking at ways of saving on their auto insurance coverage and I can say this hub has covered the "secrets" very well. Many thanks.

    • profile image

      HBF 6 years ago

      This a lot of information given by you Soni2006, it was a good read. I am just wondering what is the best way to get a cheap car insurance with all the benifits, i am just planning to buy one car and these insurance policies are a bit confusing.

    • profile image

      Audrey 7 years ago

      Those factors should be taken into account by all drivers.

    • soni2006 profile image

      Rajinder Soni 7 years ago from New Delhi, India

      @tonyn13, thanks a lot for your visit and review of this hub. Also thanks for the link. I will definitely check it out regarding that new information you are talking about.

    • tonyn13 profile image

      tonyn13 7 years ago

      Hi soni2006... very nice article on the topic of auto insurance deductibles. I'd like to share some related information on a new product that is now available in the US and is expanding to other countries. It can help drivers to offset the potential costs of carrying a higher collision deductible. Please check out my hubpage on the topic:

    • soni2006 profile image

      Rajinder Soni 7 years ago from New Delhi, India

      Yes it took some time but it is paying off well with readers like you who know to appreciate when read something useful. Thanks Ventak.

    • profile image

      Venkat 7 years ago

      Thanks for such an descriptive hub. It might have involved lot of work and care.

    • soni2006 profile image

      Rajinder Soni 8 years ago from New Delhi, India

      Thank you so much SpiffyD for your expert feedback and expert advice on how to use deductibles to maximum effect when you buy a car insurance. I am really proud today that an expert insurance advisor like you has visited my hub on insurance. That's great.

    • SpiffyD profile image

      SpiffyD 8 years ago from The Caribbean

      It's good when you see an article on insurance that is lucid. Good hub, although there could have been more on how to use deductibles to maximum effect. When you buy car insurance, you need to avoid paying too much but not be "penny wise and pound foolish." Therefore, findind a balance with deductibles (which is virtually self-insurance) is important.

    • soni2006 profile image

      Rajinder Soni 8 years ago from New Delhi, India

      It's my pleasure Veronica. I will be publishing my new hubs on auto insurance for the coming week. Best of luck to you.

    • Veronica Allen profile image

      Veronica Allen 8 years ago from Georgia

      Thank you soni2006 for another valuable hub, chock full of vital information.