Here's Why I'm Raising My Car Insurance Deductible -- and Maybe You Should, Too

Revisiting your insurance coverages at least once a year is a smart idea. You never know when another company might be able to offer you a better deal on the same policies you already have, which might include auto insurance, homeowners insurance, and beyond.

A big life change is another great reason to reconsider your insurance situation. As I write this, I am less than 24 hours away from closing on a mortgage and officially becoming a homeowner again, for the first time in a long time. In the course of researching homeowners insurance companies, I provided information to get a new car policy, too. I also decided to raise my deductible for my auto insurance in the process. Here's why.

My financial situation has changed

I've owned a car in my own name since I was 21 years old and a senior in college -- when I bought that car, I was also responsible for insuring it and could no longer piggyback off my parents' auto insurance policy. Since I had college student (and then graduate student) finances, I had my deductible set relatively low, at $500. Your policy deductible is the amount of money you must cough up when you file a claim, and then your insurer picks up the rest of the tab for the repairs to your vehicle.

Unfortunately, my finances didn't improve as dramatically as I hoped after I got out of school and started in my first career, so I just kept my deductible set at $500. That was a dollar figure I could reasonably hope to cover from my meager savings account balance. It wasn't until recently that I could swing a higher deductible thanks to changing my money situation, so I'm boosting my deductible to $1,000.

It comes down to saving money -- as many things do

Swapping your low policy deductible for a higher one is a very accessible means of lowering the cost of your policy. Sure, I could probably reduce my car insurance premiums by agreeing to download an app or put a monitoring device in my car so my insurance company can check up on my driving, but I have privacy concerns with telematics. I also have a proven record as a safe driver with no tickets or collisions in a very long time, and I'm already rewarded by my insurer with a lower rate as a result.

So right now, I'm focusing on saving money on insurance in two other ways:

• Bundling my coverage: This move has perks beyond saving money, but the money savings can be significant. Bundling home and auto insurance can save the policyholder an average of $106 per month, according to State Farm. Plus, it can be convenient to have just one insurer to go to when you have a problem and need to file a claim.
• Raising my deductible: While I'll have to cough up twice as much money in the event of filing a claim, raising that figure from $500 to $1,000 can offer savings on policy costs. According to Progressive, drivers who double their policy deductible from $500 to $1,000 could save 28% on their premiums. With a higher deductible, I'll be taking on more of the risk than my auto insurer, and as a result, my monthly costs will be lower.

Should all drivers raise their car insurance deductibles?

Maybe -- but it's a good idea for drivers to consider their emergency fund and general financial situation. If needing to pay more to an insurer in the event of filing a claim won't be a major hardship, it's certainly worth considering. Drivers should also take the cash saved on premiums and stick it in a savings account, so it's ready just in case.

But for drivers on shakier financial ground, like I was for many years, it might be better to pay a bit more for those premiums in exchange for the peace of mind that comes from knowing car repairs will be taken care of for a smaller amount of money. As in all things personal finance, the choice for this one is personal.