Should I Raise My Car Insurance Deductible?

How Can Raising Your Car Insurance Deductible Affect Your Policy?

Raising your car insurance deductible could affect your policy in a few ways—including your rate and how much you'll need to pay out of pocket if you need to file a claim.

When calculating your premium, insurance companies consider many factors, including your driving history, age, location, coverage limits and the amount of your deductible. Opting for a higher deductible usually lowers your premium, but you'll likely be on the hook for more financially after an accident.

A car insurance deductible is the amount you must pay out of pocket before your insurance kicks in to pay the rest of the bill. Most auto insurance policies let you choose a deductible between $250 and $2,500, and some offer a $0 deductible.

Generally you'll need to pay a deductible when your claim falls under coverage that has a deductible—and they vary widely. For example, collision or comprehensive coverage deductibles typically range from $0 to over $2,000. And a deductible for uninsured and underinsured motorist coverage is typically $100 to $1,000.

Deductibles don't apply to liability insurance coverage, so you won't have to pay anything out of pocket for injury or property damage you cause to others. Many policies also offer a $0 deductible for glass claims, like a cracked windshield.

Learn more: Factors That Affect Your Car Insurance Costs

Pros and Cons of Raising Your Deductible

When considering a high-deductible auto insurance policy, be aware of the pros and cons.

Learn more: What Are the Types of Car Insurance?

How to Decide if Raising Your Deductible is Right For You

Deciding whether raising your car insurance deductible makes sense typically depends on your financial situation, personal preferences and other factors like your driving habits or vehicle's worth.

Here are some questions to consider to help determine if a high insurance deductible or a low deductible is best.

• How much can you realistically afford if you needed to file a claim? Choosing a $1,000 deductible to save on your premium might be tempting. But a middle-of-the road deductible, like $500, might be a better option if you're tight on cash or don't want to dip into your savings to cover a claim.
• How often do you drive? If you only drive occasionally, your risk of getting in an accident is typically reduced. So a high deductible might be a good fit if you work from home and don't have to commute, are retired or are a student.
• Are you a high-risk driver? Risky drivers that have a lot of tickets or a history of accidents may want to consider a lower deductible for peace of mind. The same goes for drivers who travel often at night or park their vehicle in theft-prone neighborhoods.
• Do you finance your vehicle? Most lenders require a certain amount of coverage—and possibly a specific deductible amount—to make sure you can afford necessary car repairs. Check the fine print on your financing agreement to see what's required.
• What's the value of your vehicle? The age and condition of your car is worth considering when deciding on a deductible amount. If you have an older vehicle that's only worth a few thousand dollars, a $1,000 deductible might not make financial sense.
• Do you rely solely on one vehicle? If a high deductible would delay repairs on your primary vehicle, you could be without a vehicle if you don't have a second car or alternative means of transportation.

The Bottom Line

Deciding to raise your car insurance deductible could be a gamble in some situations, like when you don't have an emergency fund or tend to get into a lot of accidents. But if you're looking to save money in the short term on your premium and can afford to cover the cost of a higher deductible if the unexpected happens, it could be worth the switch.

You can also talk to your insurance company or agent about other ways to save, like discounts, cutting back unnecessary coverage or programs that reward safe driving.

Because car insurance companies in many states use credit-based insurance scores as a factor when calculating rates, improving your credit may also help you save. Credit-based insurance scores are distinct from the scores lenders use, but they are based on many of the same factors. Start by checking your credit report and FICO^® Score^Θ for free from Experian to see where your credit stands. Pay your bills on time, pay down high-interest debt and take other steps to build your credit.