Dave Ramsey says you can save money by raising your car insurance deductible. We did the math to see if it works
Dave Ramsey says you can save money by raising your car insurance deductible. We did the math to see if it works Aditi Ganguly Sun, July 26, 2026 at 5:45 AM PDT 8 min read The Ramsey Show Highlights/Youtube Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below. With the price of everyday essentials like gas and groceries rising, Americans will take a little respite wherever they can get it. Recently, Dave Ramsey offered up an unexpected way to save on car insurance on his radio show that counterintuitively involves taking on more risk (1). In response to a listener's question about whether to lower or increase their car insurance deductible, he suggested raising it in order to pocket the savings they'd earn on their monthly premium. Must Read Jeff Bezos backs a platform that lets anyone invest in rental homes for as little as $100 6 ways to build wealth like a landlord without actually being one JPMorgan still sees gold hitting $5,000/oz by Q4 and savvy investors are protecting their wealth with a tax-advantaged Gold IRA. Learn more with a free guide from Priority Gold The tax breaks in Trump's 'big beautiful bill' expire after 2028 and experts say most people won't act in time. What to do before the window closes He noted that this strategy only makes sense if the decrease in your premium rate is substantial enough that it makes a higher deductible worth it. You could take the money and stash it in a high-yield savings account. If you ever do need to use it, you can withdraw the money. "We're always trying to raise deductibles and raise the amount we have in savings to cover it so we're giving the insurance company less money," he said. The math behind Ramsey's thinking Let's play out this scenario with some basic numbers. Say you pay $300 per month for your car insurance and have a $500 deductible. If you change your policy and take on a $1,000 deductible, but your premium drops to $250, Ramsey's approach could be worth it. A $50 per month drop in your premium rate amounts to $600 a year in savings, compared to the extra $500 of risk you agree to take on. This is just one example of how this could work. But generally, if you can make your money back on the added risk within three years, it's worth it, Ramsey said. "Take the savings on your premium, divide that into the additional risk and if that's about a three, about a three-year risk pattern, you're probably wise to take the higher deductible in that case," he said. A scenario where this doesn't work, using the same example above, is if your premium only drops by $10 to $290 with a $1,000 deductible. That's $120 a year in savings. So it would take more than three years for that money to enter your account. Story Continues 'Insurance should cover catastrophes, not...
MESWAO B1 Tablet, 14.1 inch 1920*1080 IPS Screen, MTK6769 8 Cores, 6GB RAM 128GB ROM, Android 13, WiFi 5 Bluetooth 5.2, 13MP+5MP Camera, 10000mAh Battery, 4*Speakers - EU Plug, Golden
209.49
🌟 Hot deal! This trending product is flying off the shelves. Get yours before it's too late!
Affiliate link — Commission earned at no extra cost to you
Comments
Post a Comment