When Should You Not Raise Your Deductible to Lower Your Premium?

Car insurance payments may not be your favorite bill to pay each month, but the alternative--being an uninsured driver--could result in bills that do much more damage than your monthly insurance tab. Even something as simple as a deductible you can't afford could throw your budget into a dangerous tailspin that results in steep financial consequences for years.

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Imagine that you have a $1,000 deductible and get into a car accident that results in $2,000 worth of damages. Your insurance company will pay $1,000 and you must pay the other $1,000. Now, where are you going to get your $1,000? If you don't have the cash available in your savings or checking account, you may have to resort to using credit cards with 12% or more in interest fees. If this accident happens close to your renewal date, your deductible will no longer be met and another car accident could result in another $1,000 out-of-pocket expense.

While the liklihood of two similar accidents happening so close together and maxing out your deductible is small, it should not be ignored. Deductibles may be a great way to lower your car insurance payments, but they only work for you if you can afford them.