Should You Increase Your Insurance Deductible?

Looking for ways to lower your insurance premium? Increasing your deductible might be one option—but it’s not always the right choice.

Many people are surprised to learn that adjusting their deductible can have a noticeable impact on the cost of their insurance. However, before making any changes, it’s important to understand how deductibles work and whether a higher deductible makes sense for your financial situation.

Let’s take a closer look.

What Is a Deductible?

A deductible is the amount you’re responsible for paying out of pocket before your insurance company begins paying for a covered claim.

For example, if your homeowners insurance policy has a $1,000 deductible and you experience $8,000 in covered storm damage, you would pay the first $1,000, and your insurance company would typically pay the remaining $7,000 (up to your policy limits).

The same concept applies to many types of insurance, including auto and homeowners policies, although deductibles don’t apply to every type of coverage.

How Does Increasing Your Deductible Affect Your Premium?

Generally speaking, the higher your deductible, the lower your insurance premium.

Why? Because by choosing a higher deductible, you’re agreeing to take on more of the financial responsibility if you have a claim. That reduces the insurance company’s potential payout, which often results in lower premiums.

For example:

While every insurance company calculates premiums differently, the overall principle remains the same.

When Increasing Your Deductible Might Make Sense

A higher deductible could be a smart financial decision if:

You Have an Emergency Fund

One of the biggest considerations is whether you could comfortably pay your deductible if you needed to file a claim tomorrow.

If paying a $2,500 deductible would create financial stress, increasing it simply to save on your premium may not be worth the risk.

You Rarely File Claims

If you’ve gone many years without filing a claim, a higher deductible may allow you to save money on premiums over time.

Insurance is designed to protect against significant financial losses—not necessarily every minor repair or incident.

You Want Lower Monthly Costs

If reducing your monthly insurance expenses is a priority, increasing your deductible may help offset rising insurance costs while still maintaining valuable coverage.

When You May Want to Keep a Lower Deductible

A lower deductible may be the better option if:

• You don’t have enough savings to comfortably cover a larger out-of-pocket expense.
• You prefer predictable costs after a claim.
• Your budget would be significantly impacted by paying a higher deductible unexpectedly.
• You live in an area where claims are more likely due to weather or other risks.

The goal is to choose a deductible that fits both your insurance needs and your financial comfort level.

Don’t Choose a Deductible Based Only on Price

It’s tempting to focus on getting the lowest premium possible, but choosing a deductible should be about more than just saving money each month.

Ask yourself:

• Could I afford this deductible if my home was damaged today?
• Would paying this amount create financial hardship?
• Am I comfortable assuming more risk in exchange for lower premiums?

If the answer to those questions is “yes,” increasing your deductible may be a reasonable choice.

Review Your Deductible Regularly

Your financial situation changes over time. Maybe you’ve built up an emergency fund, paid off debt, or purchased a new home or vehicle.

That’s why it’s a good idea to review your deductible whenever you review your insurance policies. A deductible that made sense five years ago may not be the best fit today.

Likewise, if your financial situation has changed, lowering your deductible could provide added peace of mind.

Talk With Your Insurance Agent Before Making Changes

Every insurance policy is different, and the savings from increasing a deductible can vary depending on your carrier, coverage, and individual circumstances.

Before making a decision, it’s worth having a conversation with your insurance agent. They can help you compare premium savings, explain how different deductible options affect your policy, and make sure you’re choosing an amount that fits your budget.

The Bottom Line

Increasing your deductible can be an effective way to lower your insurance premium—but only if you’re financially prepared to pay that higher deductible when you need it.

The best deductible isn’t necessarily the lowest or the highest. It’s the one that provides the right balance between affordable premiums and an out-of-pocket expense you can comfortably manage.

At Farrell & Associates Insurance Agency, we’re here to help you evaluate your coverage and make informed decisions that fit your goals. If you’re wondering whether increasing your deductible is the right move, we’d be happy to review your policy and walk you through your options.

Have questions about your current deductible or insurance coverage? Contact Farrell & Associates Insurance Agency today—we’re here to help!

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This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.