D. Gilson is a writer and author of essays, poetry, and scholarship that explore the relationship between popular culture, literature, sexuality, and memoir. His latest book is Jesus Freak, with Will Stockton, part of Bloomsbury’s 33 1/3 Series. His other books include I Will Say This Exactly One Time and Crush. His first chapbook, Catch & Release, won the 2012 Robin Becker Prize from Seve...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer

UPDATED: Sep 29, 2021

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Just the Basics

  • It can be bad to have a high deductible if it’s is too high to cover any damage to your vehicle
  • Deductibles are typically associated with collision and comprehensive car insurance policies
  • Deductible limits range from $250 to $1,000, and increasing your deductible may reduce your rates by up to 40%

Deductibles are agreed-upon amounts that you’re responsible for paying for out of pocket before your insurance provider steps in. So is it bad to have a high deductible on car insurance?

High deductibles help reduce the cost of car insurance, which is a good thing. But in case you ever file a claim, avoid setting your deductibles to an amount you cannot reasonably afford to pay out of pocket.

Below, discover tips for setting appropriate deductible limits on your car insurance policy to fit your budget without compromising your protection.

After learning about the best ways to buy high deductible car insurance, remember to enter your ZIP code into our free rate tool above to compare quotes from the best companies near you.

Is it bad to have a high deductible on car insurance?

Securing affordable high deductible car insurance is usually not a bad thing. Increasing your deductible limits is a great way to decrease your monthly car insurance rates.

But the amount of savings you’ll earn with high deductible car insurance quotes varies by state.

So you can expect to save somewhere between 8% and 40% on your monthly insurance premium costs.

While 40% is a lot of potential savings, be careful not to increase your limits too much, or it could be bad. There are a few crucial factors you should consider when choosing a deductible.

First and most importantly, can you afford to pay a higher deductible amount if an accident occurs?

If you currently have a low $250 deductible and plan to increase it to $1,000, ensure you can feasibly pay that $1,000 whenever you file a claim without experiencing financial distress.

Next, calculate your savings with assistance from your agent to verify if increasing your deductible leads to enough savings to make it worth your while.

For example, let’s assume your car insurance costs $1,000 annually and raising your deductible from $500 to $1,000 decreases your rates by 10%. Now, you pay $900 annually and save $100.

So your deductible increased by $500, but you’re paying $100 less each year.

That means you must go five years without filing a claim for the savings that you see to be worthwhile.

Now consider how often you file claims. Even if you file one or two per year, a lower deductible is better as you’ll pay less out of pocket each time.

However, if you have a clean driving record with no accidents for several years, it makes sense to increase your deductible as you likely won’t use it, anyway.

Other factors, like the value of your vehicle or if you lease or finance a car, also impact your deductible amounts.

Cheap cars, for example, usually do not need low deductibles because repair costs are often affordable.

Plus, dealerships and banks typically require you to purchase collision and comprehensive coverage if you finance your car.

Setting higher deductibles helps keep your full coverage car insurance rates low while you pay off your vehicle.

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What is a car insurance deductible?

What is a deductible for car insurance? A deductible is an agreed-upon amount you are responsible for paying out of pocket whenever you file a claim.

Usually, it’s anywhere from $250 to $1,000. You can find it on the declarations page of your insurance policy.

Insurance companies use deductibles as a way to share the financial risk between you and the insurer.

The monetary responsibility ensures you are filing the claim for the right reasons. Otherwise, drivers could take advantage of insurers and file as many claims as they wanted, all paid for by the provider.

Filing faulty claims for reimbursement money is considered car insurance fraud and is illegal.

According to the Insurance Information Institute (III), insurance fraud costs the average family between $400 and $700 each year.

But when do you pay the deductible for car insurance? Imagine you have a $1,000 deductible on your comprehensive insurance, and a tree falls on your vehicle, causing $4,000 worth of damage.

You pay the $1,000 deductible limit out of pocket, then your provider covers the remaining $3,000, up to your policy limits.

An insurance policy limit is the highest amount your provider pays for a single claim. If the cost of damage exceeds that amount, you’re responsible for the remaining balance.

How does a deductible work? Typically, you pay for the damage up front, and your provider mails you a check reimbursing you for the claim amount minus your deductible.

If you’re not at fault and you use collision coverage, the at-fault driver’s insurance may pay your deductible for you, in which case you’ll receive a refund through their provider.

But deductibles are not associated with all of the different types of car insurance coverages. Usually, it only applies to policies that protect your property, like comprehensive and collision insurance.

Property damage liability and bodily injury liability insurance do not have associated deductible limits.

Is it bad to have a high deductible on car insurance? The Bottom Line

Ultimately, higher deductible lower premium car insurance can be a little risky. But, for many drivers on a budget, it’s worthwhile.

Fortunately, there are other ways to lower your car insurance premiums besides using a high deductible car insurance company.

To save money on car insurance without relying on increased deductibles, it’s vital you know what to look for in a good policy.

Shop around and compare quotes online to verify that your current premiums are still competitive.

Also, ask about car insurance discounts you’re eligible to earn, like safe driver and claim-free discounts.

Now that you’ve determined if high deductible car insurance rates are right for you, enter your ZIP code into our free tool below to compare quotes from the best companies in your area.