Should You Switch to a Higher Deductible Car Insurance in 2026?
Your car insurance deductible is an important component of your auto plan. It can affect everything from your monthly premium to how much you pay when you make a claim. In many cases, opting for a higher limit can help you decrease your monthly costs. But is choosing a high deductible car insurance plan right for you and your budget? Your local Freeway Insurance agent is happy to explain car insurance deductibles so you can choose wisely.
What Insurance Deductibles Mean for Drivers
Insurance deductibles are the amount you agree to pay when you file a successful claim. Knowing how deductibles work can help you pick out the right policy for you and your vehicle. Here’s a basic breakdown to help you understand the details of your auto plan.
Deductible Meaning
For auto policies, deductibles are the amount you have to pay before your policy kicks in. For example, if your policy has a $500 deductible, you would have to pay $500 worth of repairs after an accident, and your insurer would cover the rest.
Car Insurance Deductibles Explained
When you set up your policy, you can often choose between multiple price points for your deductibles. You essentially decide how much you’re willing to pay out of pocket if you need to make a claim. Deductibles can range from $0 to thousands of dollars. Typically, you’ll have to pay the amount every time you file a claim.
You may also have different deductibles for different situations. Typically, you’ll have separate deductibles for comprehensive and collision coverage, so you can pick your desired rate for each type of protection.
How a Higher Deductible Can Lower Your Monthly Premium
When you sign up for a higher out-of-pocket payment, you’re agreeing to take on more financial responsibility if you need to make a claim. This reduces your financial risk to insurers, qualifying you for a lower monthly premium. Lower deductibles will come with higher premiums to offset the risk, and higher deductibles will come with lower monthly rates.
As a result, switching to a higher deductible policy can be a great way to reduce your monthly costs, especially if your coverage costs recently went up.
When Raising Your Deductible Makes Financial Sense
Opting for higher deductibles is an easy way to save money on insurance. But when should you choose low deductible car insurance, and when should you pick a higher limit? Ultimately, it comes down to your driving habits, your risk tolerance, and your financial situation.
Ideal Situations for Safe Drivers
When doing financial planning for your car insurance, think about your likelihood of causing an accident. If you have a clean driving record and a history of driving safely, you’re less likely to get into an accident and make a claim. As a result, higher deductible savings plans could be a smart way for safe drivers to get cheap car insurance.
When You Drive an Older Vehicle
Unless you have a high-end vehicle, a classic model, or a foreign car, older cars are usually worth much less than newer vehicles. As a result, your insurer might not pay much for repairs before they consider the car to be totaled. In that case, it might be worth raising your deductible for a lower up-front payment. In many cases, you might be able to repair the car yourself more affordably, saving you money on your premium, lowering the cost of repairs, and avoiding a ding to your claims history.
When a Higher Deductible Could Backfire
Despite the appeal of higher deductible savings, sometimes a high-limit plan isn’t the right move. In many situations, the lower premiums for your insurance don’t offset your out-of-pocket expenses if you have to make a claim. If you aren’t prepared to pay the full portion before your policy kicks in, you could be out of luck.
It’s important to keep in mind that even if you drive safely, you’ll still need to pay your out-of-pocket contribution in situations such as hit-and-runs or weather damage. A good middle ground is to have a higher limit for your collision coverage and a lower limit for your comprehensive.
Why You Should Always Have an Emergency Fund
Having a strong emergency fund is the best way to offset the risk of a high-deductible car insurance plan. If you always have your out-of-pocket amount set aside in case of emergencies, you won’t have to worry about being hit with a large repair bill in the event of an accident.
How To Choose the Right Deductible for Your Budget
Knowing how to choose your car insurance deductible is an important part of financial planning and car insurance. Ultimately, it comes down to your budget, your savings, and your willingness to take on risk.
Start by comparing your current policy to similar policies with higher deductibles and see how much you would save each month. Then, consider whether that amount would eventually offset your out-of-pocket obligation if you get into an accident. It’s also important to consider whether paying a bit more would be worth the added peace of mind.
Finally, remember to look for additional discounts as you explore your options. Getting a home and auto policy bundle, for example, could save you extra money each month, making it easier to get the deductible you want.
See How a New Deductible Could Lower Your Rates
If you want to save money on insurance, choosing a policy with a higher out-of-pocket contribution could be a smart move. Adjusting your limit to meet your budget is one of the easiest auto insurance tips to implement. However, it’s important to set aside money to cover your contribution to make sure you can always afford repairs.
Looking for affordable auto insurance that’s still dependable? Freeway Insurance has plenty of plans with different deductibles to suit your unique needs and preferences. Plus, if you need car insurance deductibles explained, knowledgeable Freeway agents can help walk you through the process and teach you how to choose your car insurance deductible. Find cheap car insurance today by requesting a free quote online, calling (800) 777-5620, or visiting a local Freeway office.
FAQs
Explore these FAQs to learn a few more helpful auto insurance tips:
How Much Can I Save by Raising My Deductible?
Depending on how much you increase your out-of-pocket contribution, you could save 30% or more on your monthly premiums. The actual amount depends on the specifics of your policy and how dramatic an increase you choose. Switching from a $0 contribution to a $1,000 out-of-pocket payment, for example, will get you a higher level of savings than switching from $250 to $500. Regardless, you’ll still be able to save.
What’s a Good Deductible for Most Drivers?
Most drivers have $500 deductibles, as $500 is considered the industry standard. However, that doesn’t mean you have to pick the standard amount. A higher or lower option could work better for your budget or preferences.
Can I Change My Deductible Mid-Policy?
You can absolutely change deductibles, even if you’re midway through a policy. Most insurers will let you cancel at any time, so you simply have to end one policy and start a new one with a higher limit.
Does a Higher Deductible Affect Claims?
Having a higher out-of-pocket requirement only impacts how much you pay when you file a claim. It doesn’t affect whether or not a claim is approved. However, people with higher deductibles may ultimately choose to file fewer claims if the damage is cheaper than their current limit.
How Does My Deductible Impact Total Insurance Cost?
Deductibles affect both your monthly premium and the amount you pay when filing a claim. Lower deductibles will result in higher premiums and vice versa. If you have to make a claim, higher deductibles will result in a higher up-front payment. The impact on your total coverage cost will ultimately depend on how often you have to make a claim.
