Raising Your Deductible Can Lower Your Auto Insurance Bill—But Should You?

Your deductible is one of the biggest levers you can pull to lower auto insurance costs—and one of the most overlooked.

A deductible is the amount you pay out of pocket before insurance begins covering a claim. In general:

• Lower deductible = higher premium
• Higher deductible = lower premium

For many drivers, especially those with older vehicles, adjusting deductibles can reduce insurance costs without changing coverage.

Why Higher Deductibles Lower Premiums

Insurance companies charge more when they expect to pay smaller claims more often. Choosing a low deductible shifts more of the risk to the insurance company, which increases your premium.

Raising the deductible means:

• You take on more out-of-pocket risk
• The insurer takes on less
• Your monthly or annual premium usually drops

This can be especially useful if you:

• Rarely file claims
• Have a good driving record
• Want lower ongoing insurance costs

The Most Important Question To Ask

Before raising your deductible, ask yourself:

“Could I comfortably pay this deductible tomorrow if I had to?”

If the answer is yes, a higher deductible may make financial sense. (TDS Note: “Comfortably” should not mean completely wiping out your emergency savings or relying on credit cards to cover the expense.)

If the answer is no—especially if a surprise repair bill or accident expense would force you into debt or create financial hardship—a lower deductible may still be the safer choice, even if the premiums are higher.

The goal is to lower insurance costs without creating a new financial problem elsewhere.

Common Deductible Changes

Many drivers move:

• From $250 to $500
• Or from $500 to $1,000

Even a modest increase can reduce premiums noticeably.

Example:

• Current deductible: $250
• New deductible: $1,000
• Annual premium savings: $250

At that rate, the premium savings would equal the additional deductible exposure in about three years ($250 X 3 = $750 — the same as the additional deductible amount).

That does not automatically mean you should raise it—but it helps show how the math works.

Raising Deductibles vs. Dropping Coverage

For some drivers, especially those with older cars, raising deductibles can be a middle-ground alternative to dropping coverage entirely.

For example:

• Keeping comprehensive coverage with a higher deductible may still protect against major losses like theft or hail damage while lowering premiums.
• Raising deductibles on collision coverage may buy time before deciding whether dropping collision coverage entirely makes sense.

This approach can work well for drivers who:

• Still rely heavily on the vehicle
• Could not easily replace it tomorrow
• Want to lower costs gradually instead of removing coverage all at once

Older Cars and Deductibles

As cars age, deductible decisions become more important.

A very high deductible on a very low-value car may not provide much real benefit because:

• The insurer will only pay up to the car’s actual value
• Small claims may fall mostly within the deductible anyway

That’s why deductible decisions and coverage decisions should work together.

For some older vehicles:

• Raising deductibles makes sense
• Dropping collision coverage may make more sense
• Keeping comprehensive coverage with a manageable deductible may be the best balance