Today, we’re explaining everything you need to know about comprehensive insurance deductibles.
How Comprehensive Insurance Works
If a tree branch falls on your car and smashes the roof, then you might make a claim under your comprehensive insurance. If someone steals your car, then you might make a claim under your comprehensive coverage.
No state in America requires you to have comprehensive insurance. It’s completely optional. Without comprehensive insurance, however, you could pay out of pocket for hail, fire, flooding, theft, vandalism, collisions with animals, and other unexpected incidents.
How Comprehensive Car Insurance Deductibles Work
A comprehensive car insurance deductible works similarly to any insurance deductible. The deductible is the amount you pay your car insurance company for each claim before your car insurance company covers the rest.
Let’s say a tree falls on your car while it’s parked. Your vehicle requires $5,000 worth of repairs. You have a $500 comprehensive insurance deductible. You pay your $500 deductible, and then your insurance company pays the remaining $4,500 balance.
Comprehensive insurance deductibles tend to be lower than collision insurance deductibles. Some drivers have comprehensive insurance deductibles as low as $250, for example.
There are pros and cons to having low comprehensive insurance deductibles. Keep reading to find out how high or low your comprehensive insurance deductible should be.
Higher Deductibles and Lower Premiums
When you raise your deductible, you reduce your chances of making a claim. Your car insurance company then rewards you with lower insurance premiums.
Let’s say your comprehensive deductible is currently $250 and you pay $100 per month for car insurance. You might want to raise your deductible to $1,000, in which case your premiums drop to $80 per month.
Lower Deductibles and Higher Premiums
Contrarily, some drivers appreciate having a lower deductible. It makes it easier and cheaper to file a claim.
A low comprehensive insurance deductible could be anywhere from $100 to $250. At this range, you’ll pay higher premiums than someone with a higher deductible. Instead of paying $100 per month for car insurance, for example, you might pay $120.
How High Should Your Comprehensive Deductible Be? Things to Consider
Your comprehensive deductible will vary in size based on your financial needs and aversion to risk. Some of the things to consider when setting your comprehensive deductible include:
Higher Deductibles Force You to Self-Insure
When you have a higher deductible for comprehensive coverage, you’re making it more difficult to file a claim under your comprehensive coverage. If your deductible is $1,000, for example, then you’ll never make a claim for damages that cost less than $1,000 to repair.
Let’s say you scrape the side of your car pulling into the garage. Your car has $980 worth of body damage. Your deductible, however, is $1,000. It’s not in your best financial interest to make a claim. It’s smarter to pay the claim out of pocket.
Someone with a $250 comprehensive insurance deductible, meanwhile, would want to make a claim in this situation.
Comprehensive Insurance Claims Don’t Raise Rates
Many drivers avoid making claims on their collision insurance because they want to avoid higher rates. If you make a claim under your collision coverage for an at-fault accident, for example, then you might pay higher rates for years into the future.
Comprehensive insurance doesn’t work that way. In fact, some states forbid insurers from raising rates for comprehensive claims. You can make multiple comprehensive insurance claims for various vehicle damages – assuming the damage was caused by a covered incident.
In other words, it’s easier to make a claim under your comprehensive coverage, and even cautious drivers may be more likely to make a claim under their comprehensive coverage.
Can You Afford your Deductible?
If you cannot afford your deductible, then insurance isn’t very useful. Your comprehensive insurance deductible should be an amount you can afford to pay on an emergency basis.
If money is tight or you live paycheck to paycheck, then you may want a lower deductible. Otherwise, you’ll never end up making a claim.
How Valuable is your Vehicle?
If your vehicle is old or less valuable, then a high deductible can be pointless. Your deductible might be just a few thousand dollars less than your car’s total value. If your car is worth $3,000 and your deductible is $1,000, for example, then it severely limits the value of insurance. At this point, you’re better off dropping your deductible or removing comprehensive coverage altogether.
How much money can you save with a lower comprehensive insurance deductible? Some insurance companies give you a steep discount for having a higher deductible, while others only give you a small discount. Raising your deductible to $1,500 may not be worth it if you’re only saving $50 per year.
Ultimately, your car insurance deductible is a personal choice. Some people feel uncomfortable with a high deductible. Others enjoy the peace of mind of having a low deductible.
It’s up to you to decide on the best comprehensive insurance deductible based on your financial needs and aversion to risk.