One way to save on car costs is to increase your car insurance deductible. But is this always a good idea? Deciding on your deductible depends mostly on two types of risk: financial and driving. Let’s find out more.

What Is It?

If you already know what a deductible is, then you can skip this part. If not, the deductible is what you pay on any insurance claim. Let’s say you are in an accident and the total damages are $1000. If your deductible is $250, then your insurance will pay $750, and you pay the $250 deductible.

Financial Risk Factors

If you are the type of person that has trouble saving, then a high deductible might not be the best choice. Because if you are in an accident, you will have to pay more for repairs. Having an economic cushion is necessary when you select a high auto insurance deductible.

On the other hand, if you are able to save, then a higher deductible might be a way to minimize insurance costs. The best strategy is to set aside 50-100% of the deductible amount in an interest earning savings account. Do not not touch this money unless you have to make an insurance claim.

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Driving Risk Factors

If you are a very safe driver with a clean driving record, then a higher deductible might be a money saver. Younger or accident prone drivers should probably carry more coverage (that is, lower deductible) since there is a higher chance that you will make an accident claim. Unfortunately, some insurance companies require a high deductible for those they consider high risk drivers.

Insurance Type

Some insurance companies allow you to modify your deductible depending on insurance type. For example, if you live in a big city, it might be wise to carry a lower deductible on comprehensive insurance which covers damage due to theft and vandalism. You could compensate for this with a higher deductible on collision insurance which covers accidents. This would be especially effective if you are a safe driver. This might even provide the incentive for you to drive safer. Why? Because you know a bigger part of accident repair costs will come out of your pocket with a high deductible.

Let’s Do The Math

Let’s say by increasing your deductible from $200 to $500, you end up saving $30 a year on your monthly premium payment. In this case, it would take you 10 years to pay off the $300 difference in the deductible. Here you might be better off with a lower deductible. Now if your savings on your monthly payments was closer to $300, then a higher deductible would be worth it.


Deciding on your auto insurance deductible amount is important. If you consider all the factors mentioned above, you can have more confidence in your auto insurance coverage.

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