The Pros and Cons of Increasing Your Auto Insurance Deductible

If you buy car insurance, then you will likely have to choose a deductible on certain coverage. Deductibles are costs that the policyholder agrees to pay before their insurer pays remaining claim costs.  


Though this might seem like an extra cost burden to you, a deductible is actually a flexible perk that you can use to your advantage. Sometimes, it can even help you save money on your premiums. You might feel tempted to raise or lower your deductible based on what you can afford to pay out of pocket. This is the right approach, but it also merits special consideration. Let’s take a closer look. 


Understanding Deductibles 

Car insurance usually has deductibles on its collision and comprehensive physical damage coverage. So, suppose that you have a $500 collision deductible on your policy. After a wreck, your insurer might calculate that your car has sustained $3,000 worth of damage. However, you must pay for $500 worth of repairs because of your deductible value. Your insurer will then pay the remaining $2,500. 


Sometimes, you might be tempted to increase your deductible higher and higher, but you must be careful. Raising deductibles might save money, but they could wind up costing you in the end. Consider the pros and cons of carrying higher deductibles. 


Pro: Lower Insurance Premiums and Risk Ratings 

Your insurance deductible affects the amount of money that your insurer must pay on your behalf for a claim. Therefore, those with lower deductibles could force the insurer to pay more, which could raise the policyholder’s risk level. As a result, they might have to pay more for their coverage. By increasing your deductible, however, you might save on your premium because you shift some of the cost burden onto yourself and away from the insurer. 


Con: Higher Out-of-Pocket Costs 


Remember, a deductible is a cost that the insured driver agrees to pay on their own. Therefore, if you have a $1,000 deductible, then you must pay for $1,000 worth of your repairs on your own. If this isn’t a cost you can afford, then it might be better to carry a lower deductible, even if it slightly increases your premium. Any price increase is still likely to be far less than any difference in deductible costs. 


Additionally, a higher deductible means that you might have fewer opportunities to receive a payout for a damage claim. For example, if you have a $2,000 deductible and sustain $1,000 in damage, then your insurer won’t pay at all. The $2,000 deductible shows that you agree to pay for this amount of repair costs yourself. 


It’s easy to work with your car insurance agent to figure out what deductibles are best for you. We will help you decide what you can afford to pay in deductible values, and then direct you towards policies that offer optimized savings with these benefits attached.