Should You Raise Your Deductible? Do This Two-Minute Calculation First

Raising your collision and comprehensive deductibles is the most common advice for lowering a premium. It works, but it's a trade: lower payments now for a bigger bill if you have a claim. Whether it's a good trade depends on numbers you can find in a few minutes.

The calculation

• Get quotes for the same coverage at two deductibles, say $500 and $1,000.
• Subtract to find the annual premium savings.
• Divide the deductible increase ($500 in this example) by the annual savings. The result is the number of claim-free years it takes for the higher deductible to pay for itself.

If the higher deductible saves $80 a year, it takes about six years without a claim to come out ahead. If it saves $200 a year, about two and a half. The lower that number, the better the trade.

The other question

Could you pay the higher deductible tomorrow without borrowing? If not, the "savings" are a loan against a bad day. Keep the deductible at a level you could cover from savings.

Deductible strategy

• Consider different deductibles for collision and comprehensive. Comprehensive claims (glass, hail, animal strikes) are less controllable; some people keep that deductible lower.
• If your car's value is low, a high deductible on collision may mean the coverage rarely pays, in which case dropping collision may be worth considering.

Where higher deductibles help most

Newer, higher-value cars with expensive collision premiums, where the percentage savings from a higher deductible is largest.

Don't forget

Some policies waive the deductible for glass repair or when the other driver is clearly at fault and insured. Ask.

Adjust the math for your own habits

The break-even calculation assumes you'll either have a claim or you won't. Real life is messier, so run it again with two adjustments.

First, think about claims you'd never file anyway. Some drivers won't report a small scrape, whatever their deductible, to keep their record clean. If that describes you, a higher deductible changes less in practice than it appears, because you were already paying for minor repairs yourself.

Second, look at your history. If your household has had a comprehensive or collision claim every couple of years, the break-even point may never arrive, and the lower deductible might be the better value. A few questions help:

• How many physical damage claims has your household filed in the past five years?
• Do you park on the street, in a hail-prone area or somewhere with frequent break-ins?
• Is there a newer or teen driver on the policy?
• Does your lender set a maximum deductible on a financed or leased car?

That last one matters. Some loan and lease agreements cap how high your deductible can go, so check before you change it.

Deductibles don't always work the way you'd expect

A deductible applies per claim, and usually per vehicle. If a hailstorm damages two cars in your driveway, you may owe a deductible on each one. A high deductible that seemed manageable for one car can hurt twice as much in that situation.

Glass is another wrinkle. Some insurers offer a separate, lower glass deductible or full glass coverage as an option, and a few states have their own rules on glass claims. If you raise your comprehensive deductible, ask what happens to windshield claims, because that's the claim many drivers actually file.

You may also see programs that shrink your deductible over claim-free years, usually for an added charge. Run those through the same break-even logic: compare what the feature costs with how much it could reduce your deductible, and how likely you are to use it.

Finally, remember that extras like rental reimbursement only kick in on a covered claim. If a higher deductible means you'd skip filing, you'd also go without the rental car.

A realistic example

Picture this: Chris drives a three-year-old sedan and carries a $500 collision deductible. Using illustrative figures, his insurer quotes an annual premium reduction of about $150 if he moves to $1,000.

He runs the calculation: $500 divided by $150 is a little over three years to break even. Then he adjusts. He hasn't filed a collision claim in years, and he admits he'd pay for a minor scrape himself anyway. He also checks his emergency fund, which could cover $1,000 without a credit card.

One thing gives him pause. He parks on the street under a row of old trees, and his area gets hail most springs. So he raises collision to $1,000 but keeps comprehensive at a lower level, and asks whether a separate glass option is available.

Before switching, he requests quotes from two other insurers at both deductible levels, so he's weighing the trade-off and the price at the same time.

Common questions

What is a good deductible for car insurance?

There's no single right number. A good deductible is one you could pay from savings tomorrow without borrowing, and one where the premium difference justifies the added risk. Common choices are $500 and $1,000, but your emergency fund, your car's value and your claim history should decide it. Price at least two levels before choosing.

Can I change my deductible in the middle of my policy term?

Usually, yes. Most insurers let you raise or lower a deductible whenever you like, with the premium adjusted for the remaining months. The new deductible applies only to losses that happen after the change, so you can't lower it after damage occurs. If your car is financed or leased, check the maximum your lender allows before raising it, and get an updated declarations page to confirm.

Does a higher deductible lower my liability insurance cost?

No. Liability coverage generally has no deductible, because it pays other people for damage you cause. Deductibles apply to coverages that pay for your own car, mainly collision and comprehensive, and sometimes to PIP or uninsured motorist property damage, depending on the state. Raising your deductible only lowers the cost of those coverages, so the effect is limited to that part of your premium.