Should I raise my auto insurance deductible?

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Joel Ohman
Founder, CFP®

UPDATED: Jun 27, 2017

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Here's what you need to know...
  • Raising your auto insurance deductible can help to lower your car insurance premium
  • A deductible is the amount of money you must pay out of pocket for an accident
  • There are no legal requirements for deductible amounts

The car insurance deductible is the amount that you must pay towards any claim before the car insurance company pays its portion.

So, the higher the deductible, the more you must pay towards a claim. The more that you have to pay towards a claim, the lower the risk you are to your insurance company.

Therefore, your premium cost will decrease.

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Why Drivers Choose to Raise Their Deductible


As with most things that must be paid each and every month, you have probably tried to find the least expensive car insurance coverage.

One of the first things that can be done to lower the car insurance premium is to lower the coverage limits and change your deductibles to higher amounts.

While deductibles have a major effect on the actual cost of the car insurance policy, it is also important to realize what the changes might do.

You have to be careful to not price yourself out of your own car insurance policy by raising your deductible.

For example, if you change your deductible to an extremely high amount, you will most likely save a certain amount of money on your entire auto insurance policy.

However, the savings per month have to be weighed against the potential cost if you do need to file a claim. Having a $1,000 deductible does not make any sense if you cannot afford that $1,000 if you need to file a claim.

Obviously, a deductible amount can be set very low, and can ultimately lead to very high car insurance premium costs.

To make sure you have set your deductible at a reasonable amount, take a look at what you could afford if you had an accident.

Set the deductible at that amount, and most likely you will find that your premium is affordable as well.

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Keep Yourself and Your Loved Ones Covered

There are no state minimums or maximums when it comes to a deductible; however, it is important to not just base your car insurance coverage on what is the least expensive policy.

It is best to get insurance coverage that you can afford so you are covered no matter what.

Make sure you compare policies that have the same coverage amounts and same deductible amounts.

Often, online car insurance companies will produce a quote that is much less expensive than the one you currently have.

Although this may result in a lower monthly payment, in truth you are not completely covered in the case of an accident. It is vital that you have a policy that protects you, your passengers, and your vehicle.

Other Reasons to Raise Your Deductible

If you have a clean driving record void of any at-fault accidents or moving violations including speeding tickets, you are a low-risk driver who might actually benefit from raising your deductible.

Another benefit that may result from raising your deductible is the higher amount may prevent you from filing a small claim that ultimately would just end up raising your rate again.

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