How do deductibles in auto insurance generally impact premiums?

In auto insurance, a deductible is the amount that the policyholder agrees to pay out-of-pocket before the insurance coverage kicks in for a claim. Typically, higher deductibles lead to lower premiums. This relationship exists because when you assume more financial responsibility by agreeing to a higher deductible, the risk to the insurer decreases. Consequently, insurers are often willing to lower premiums as an incentive for policyholders to select a higher deductible, as this can reduce the frequency of small claims that they would have to pay.

Lower deductibles, on the other hand, result in higher premiums because the insurer takes on more risk. They have to price the policy to account for the increased likelihood of small claims being filed. Therefore, when considering the impact of deductibles on auto insurance premiums, it's clear that higher deductibles usually result in reduced premiums, aligning with the understanding that choosing a higher deductible helps save money on the overall cost of the insurance policy.