Car wrecked on road guardrail © NULL, OJO Images, Getty Images

If you have enough cash in the bank to cover unexpected expense, hiking the deductible on your auto insurance coverage could save you hundreds of dollars a year.

But if you don't, you may be taking a big risk for comparatively little return.

CarInsurance.com compared rates on the same driver for three cars at deductibles ranging from $250 to $2,500.

If the sample driver -- a 35-year-old man with a clean record in Houston -- bought the cheapest policy shown below, he could save about 50% on his annual comprehensive and collision premiums by raising his deductible from $250 to $2,500.

The figures below don't include state-required liability coverages, which don't have a deductible.

 
2004 Mazda3
DeductibleCollisionComprehensiveTotal
$250$288$104$392
$500$270$86$356
$1,000$220$70$290
$2,500$162$54$216
 
2008 Honda Accord EX
DeductibleCollisionComprehensiveTotal
$250$396$120$516
$500$336$102$438
$1,000$268$84$352
$2,500$186$62$248
 
2012 Ford Explorer
DeductibleCollisionComprehensiveTotal
$250$444$192$636
$500$416$160$576
$1,000$340$130$470
$2,500$256$86$352

The costs of comprehensive and collision coverage are determined by the value of your car and the likelihood that the insurance company will have to pay out that amount. You can save money on the cost of that coverage in three ways:

  • Drop the coverage altogether if you own your car outright.
  • Shop around with different carriers. Rates can differ by hundreds of dollars.
  • Raise the deductible.

A deductible is the amount you have to pay toward a repair. The higher the deductible you choose, the less risk of a payout for the insurance company -- and the smaller the premiums you pay.

Depending on the car, that Houston driver saves from $176 to $284 a year going from a $250 deductible to $2,500. If you have an extra $2,500 tucked away, that's a pretty good return for your risk.

But if you don't, the loss of your car as you try to find the needed cash could be devastating.

Who should raise a deductible?

Most people spend much less on comprehensive and collision coverage -- the insurance that repairs your own car -- than on liability, the insurance that covers the people you hit. Increasing deductibles only a little -- say, from $500 to $1,000 -- might not be a savings slam-dunk.

Cristofer Pereyra, an agent for Farmers Insurance in Phoenix, tells his clients who are good drivers that they're better off raising their deductible and putting the savings aside every month in case they have an accident. "The longer you have been without an accident, the longer you will be in the future," Pereyra says.

"Nobody likes to pay the deductible, but typically people choose a deductible that they can handle," he says.

Many people with high deductibles of $1,000 or more often own their car outright, have a lot of money in the bank and don't mind paying for minor damages or living with unrepaired dents on their bumper, says Penny Gusner, a consumer analyst for CarInsurance.com.

Who should not raise a deductible?

Raising deductibles is one of the best ways to save on car insurance, says Mike Sena, a financial adviser in Georgia. But putting the difference into a savings account is critical.

"You never know when you're going to need insurance," Sena says.

Those who gamble on a deductible they can't afford face the possibility of not getting their car back from the body shop until they pay it, Gusner says.

Typically, insurers pay the body shop directly for repairs, leaving the driver to pay the deductible to the body shop, she says. Storage fees may be added, too. The shop can use what's known as a mechanic's lien to hold the car.

To lower the bill, the body shop may agree to use cheaper parts or leave some repairs undone. That could hurt at resale time.

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