The Confusing Part
People raise deductibles to lower premium. That’s a rational impulse: you’re choosing to retain more risk to pay less each month.
Then a small loss happens—a windshield, a scraped bumper, a stolen catalytic converter—and the math suddenly feels different.
How It Works
Deductibles are a pricing lever because they change expected claim costs.
But the deductible decision isn’t just “pay more now vs later.” It also changes:
- how likely you are to file smaller claims
- whether a claim triggers a surcharge or knocks out a discount
- how much cash you need available on your worst day
And on auto, deductibles mostly live inside collision and comprehensive. Your liability premium is often driven more by signals and territory than by a small deductible tweak.
Where It Breaks Down
Deductible strategies stop working when the premium savings are smaller than the behavior and pricing penalties you trigger.
Examples:
- You raise the deductible, but still file small claims because you can’t absorb the loss.
- You save $12/month and then trigger a surcharge that costs multiples of that savings at renewal.
- You cut coverage structure without realizing it changed what events are actually paid.
The mechanism is simple: deductibles can lower expected losses, but claim activity can raise your future pricing tier.
The Tradeoffs
This is the core tradeoff:
- Lower premium, higher retained loss (cash-flow risk).
- Fewer claims filed, less chance of surcharges (but more self-funding).
- A “cheaper” policy, potentially more fragile on the day you need it.
There isn’t a universally correct deductible. There is only a deductible that matches your cash buffer and claim behavior.
What Moves the Outcome
Risk Signals
- Your recent claim activity (frequency matters as much as severity)
- Territory/vehicle factors that make small losses more likely (theft, hail, traffic density)
- Score/tier inputs (where allowed) that can amplify claim penalties
Coverage Structure
- Collision/comprehensive deductibles (and whether you have both)
- Rental/towing/optional coverages you actually use
- Limits and endorsements that change how quickly you hit out-of-pocket costs
Market Context
- Appetite shifts: some carriers punish frequency more than others
- Underwriting tiers: small claim patterns can move you into a different class
- Renewal repricing: claim behavior can affect what happens at the next renewal
Deeper context
For the long version, see Auto Deductibles: Where the Savings Stop Making Sense.
How to Decide
If you can pay a surprise loss without filing, raise the deductible. If not, keep cash-flow protection.
Minnesota note: rates and carrier appetite can swing by county, so a Twin Cities renewal isn’t always a perfect proxy for greater Minnesota.