UPDATED: Mar 13, 2020
It’s all about you. We want to help you make the right coverage choices.
We strive to help you make confident insurance decisions. Comparison shopping should be easy. We partner with top insurance providers. This doesn't influence our content. Our opinions are our own.
When dealing with your auto insurance policy, you can tweak your premium rates by playing around with your deductible – the amount that you will pay to cover the cost of damage before your auto insurance company pays the rest.
To better illustrate what a deductible is, imagine that you got into a car accident and caused $5000 worth in damages. If you have a $500 deductible, you’ll pay the first $500 out-of-pocket, and then your insurer will pay for the remaining $4500 in damages.
One of the best ways to save money on car insurance is to raise your deductible. However, a higher deductible isn’t always a good thing. In fact, higher deductibles can often cost you more money in the long run – especially if you need to make multiple claims.
Today, we’re explaining how to choose an insurance deductible. What’s the best car insurance deductible? What are the pros and cons of a high or low deductible? How much money can you save by requesting the highest possible deductible? Keep reading to discover the answers to all of these questions.
Look To Your Budget For Suggestions On Your Deductibles
As the primary reason to mess around with the deductible is to change the cost of your insurance, it’s important to take a look at your budget and determine exactly how much you can contribute to auto insurance each year. If you know that you can only afford the minimum coverage on your automobile you may end up with a higher deductible than you feel comfortable with. If you can find some room in your budget to spend a bit more on a better auto insurance policy, you can get a lower deductible which can be a real money-saver in the event of an accident.
Remember – while you might save some cash over the short term by going with a higher deductible, all it takes is one serious accident for those savings to be completely wiped out. If you end up in an expensive crash and have to shell out $2,000 or more for your deductible, you might have been better off going with the increased auto insurance rates and lower deductible in the first place.
Don’t Expect Huge Car Insurance Discounts with a Higher Deductible
All insurance premiums will drop with a higher deductible. Auto insurance companies, however, don’t typically offer huge savings with higher deductibles.
One study, for example, found that drivers insuring a Toyota Prius saved about $30 per year when raising their car insurance deductible from $250 to $500.
When you run the numbers, you realize that it would take years to recoup the extra $250 on your deductible through premium savings (assuming you need to make a claim).
Younger Drivers Get the Biggest Discounts with Higher Deductibles
An ordinary, middle-aged driver may not be able to enjoy significant car insurance discounts with a higher deductible. Younger drivers, however, can save hundreds of dollars per year.
The reason is simple: it’s just math. A higher deductible might lower insurance prices by 5% or 10%. If your car insurance policy is $800 per year, then you’re saving $40 to $80 per year with a higher deductible. If you’re a younger driver with a more expensive car insurance policy, however, then you might be paying $2500 or $3000 per year for car insurance. On a plan like this, a discount of 5% or 10% is worth $125 to $300 per year.
Consider a Higher Deductible on Collision Coverage and a Lower Deductible on Comprehensive Coverage
Many experts, however, recommend using a lower deductible on your comprehensive coverage. Your comprehensive car insurance policy covers things that can be difficult to avoid – like hailstorms damaging your vehicle or theft or vandalism. In these situations, a high deductible can dissuade you from ever making a claim, while a lower deductible can help you save a lot of money.
Some People Save Money with a Higher Deductible and Place the Savings into an Emergency Fund
Here’s a neat trick you can use if you’re concerned about paying a higher deductible. Choose a car insurance plan with a higher deductible. Then, take the money you save with that plan and put it into an emergency savings account.
That way, you’re saving money every month on car insurance, and that money is still ending up in your account. However, you also have an emergency fund or backup plan if you need to make a claim and pay for your higher deductible.
What’s the Average Price of a Car Insurance Deductible?
In most states, the average car insurance deductible is around $500 for collision coverage and $250 or $350 for comprehensive coverage.
Most insurance companies give you the option of raising your car insurance deductible. You’ll pay lower premiums at the cost of paying slightly more for a claim if you need to make one.
Full Deductibles Versus Partial Deductibles
You may not have to pay the full deductible in all collisions. There are full deductibles and partial deductibles.
Full Deductible: You pay the full deductible when you’re 100% at fault.
Partial Deductible: You pay a partial deductible when you’re only partially at fault. If you were 50% at-fault for the collision, for example, then you’ll pay 50% of the deductible.
Auto Accidents Aren’t Getting any Cheaper
One important factor to consider is that automobile accidents aren’t getting any less expensive to deal with. With the cost of medical treatment rising each year, property values constantly increasing and the rates charged by repair shops going up, every crash you get in to has the chance of costing you a small fortune. Even if the accident is just a “fender bender”, modern cars are built with crumple zones and other areas which give up durability in the name of safely absorbing impact. What used to be a small dent can now end up being a crushed body panel, leading to higher repair costs.
It probably sounds cliché – and a little boring – but it really does pay off to be a safe driver. If the only auto insurance you can afford comes with a high deductible, you may want to consider taking some additional care every time you get behind the wheel. The fewer crashes you get in to, the fewer times you’ll have to shell out for repairs.
A Few Questions To Ask Yourself Regarding Your Deductible
Figuring out where to balance your risk via your deductible can be pretty stressful – there’s no way around it. Here are a few questions to ask yourself that can help make the decision a bit easier:
- How much can I truly afford if I was to get into an expensive auto accident tomorrow?
- Can I afford to spend an additional $100 or $200 a year on insurance if it means paying far less up front in the event of an accident?
- Have I shopped around and gotten quotes from a number of different auto insurance companies to see who has a deductible that looks attractive and is in my price range?
- Have I leveraged any association or other discounts to save a bit on my overall insurance package and then applied these savings to reducing my deductible?
If you have the answers to these four questions above, you’re better educated on your auto insurance purchase than most.
Conclusion: It’s Up To You
Choosing a car insurance deductible is entirely your call. Some people are comfortable with a higher deductible. They’re confident that they drive safely and live in a safe area, and they’re confident they’ll have cash on-hand to pay the higher deductible if they need to make a claim.
Others have a history of making multiple claims on their car insurance. These drivers may foresee the need for future claims. These drivers may be more comfortable with a lower deductible.
Making the Final Decision with your Insurance Agent
If all of this talk about managing deductibles sounds a little bit confusing, don’t be alarmed. Auto insurance can be difficult to understand, which is why insurance agents are there to assist you. Have an online chat or a sit-down with an agent to learn more about deductibles and how they can impact your total auto insurance cost. Try to avoid looking at the cost over a single year, as you might believe that your chance of getting in a crash is pretty low and you can just get away with a higher deductible. Think out five or more years – at least until the end of your car lease or payment. Remember: you don’t choose to get in an accident, but you can choose your insurance and how you’re covered if it occurs.
Choosing a car insurance deductible is entirely your call. Compare car insurance quotes today to find out if a higher or lower deductible is the right choice for you.
4AutoInsuranceQuote.com is here to assist you with getting the best deal from the many auto insurance providers in the marketplace today. Our team scours the internet for savings to pass them on to you, so you can get your auto insurance at the best possible price. To get a free quote from a number of different providers and to see how much you can save, enter your ZIP code in the quick form at the top of this page and we’ll take care of the rest.