Car Insurance Deductibles: An Expert Guide (2023)

When you buy car insurance, you sign up for a company to cover damage costs during a car accident. However, the amount your insurance company will cover depends on your deductible.

Knowing how much your car insurance deductible is and how it factors into your out-of-pocket costs is essential if you were recently involved in a car accident. Choosing your deductibles is one of the easiest ways to lower your car insurance rates, and your costs will vary depending on whether you pay a high or low amount.

This guide explains everything you need to know about auto insurance deductibles to make the right decision before and after signing a car insurance contract.

What is a car insurance deductible?

A deductible is a way of sharing risk. As part of an insurance agreement, you agree to pay either a certain dollar amount or a percentage upfront when you file an insurance claim.

If your insurance company approves the claim, then you will be responsible for the deductible stated in your contract, and the rest of the cost will be covered up to your policy limit.

When buying full coverage car insurance, you get to select your own deductible. Depending on the type of coverage and which insurance company you use, it may be possible to modify it throughout the duration of your policy term or after experiencing any major life changes.

High-deductible car insurance usually benefits from lower premiums. Still, you’ll have to pay more out of pocket for the claim if you ever need to use your insurance, which may negate any savings from the lower monthly rates.

How does a car insurance deductible work?

An auto insurance deductible is the amount of money that a policyholder has to pay out-of-pocket when making an insurance claim. The insurance company then pays the remaining balance up to the policy’s maximum limits.

When choosing your deductible amount, it’s important to consider what you would realistically be able to pay if an accident occurred.

For instance, if you choose a plan with a high deductible, you will be responsible for paying more money upfront when filing a car insurance claim. However, setting a high deductible could help reduce your monthly insurance payments if you have significant savings or other financial resources available.

On the other hand, lower deductibles mean you will pay more in premiums each month but less out of pocket when you make a claim.

However, if the amount is too high to cover upfront, a lower deductible could be better for you in the long run. Ultimately the choice is up to you and should be based on your own particular financial situation.

Regardless of which option you choose, insurers often require deductibles as part of the comprehensive and collision insurance policies they offer and will continue to play an important role in your car insurance costs.

What is the average car insurance deductible cost?

The average car insurance deductible costs can vary greatly depending on the type of policy, coverage limits, and other factors. By setting a deductible, policyholders are able to reduce their premium payments since they assume more of the risk for any future losses.

Deductibles usually come in fixed amounts, such as $250, $500, or $1,000, but you can set yours as percentages depending on your specific policy and coverage options.

Generally speaking, the higher your deductible amount, the lower your premiums. High deductibles are usually associated with more comprehensive policies that provide greater protection against potential claims and lawsuits.

Read more: What is the difference between a deductible and a premium in car insurance?

How to Calculate Car Insurance Deductible Costs

One way to calculate the average cost of car insurance deductibles is to compare different types of insurance policies and their associated costs.

For example, suppose you purchase liability-only insurance. In that case, liability insurance does not require a deductible. Your premiums will be much lower than if you choose a full coverage plan with comprehensive insurance deductibles and deductibles for collision and uninsured motorist coverage.

Find the best uninsured motorist coverage car insurance companies.

Additionally, certain locations or driving conditions might influence how much you pay for an auto policy’s premium and deductible amounts.

Overall, the average car insurance deductible cost could range from around $500 to several thousand dollars depending on the selected policy. You should compare multiple insurance companies and determine which offers the best rates based on your needs.

It’s also important to note that there are different levels of deductibles. Generally, companies offer what is called “split deducible” plans, wherein you can choose two separate amounts for your deductible — one for collision coverage and the other for comprehensive car insurance.

Be sure to shop around and contact various insurance companies before making decisions about car insurance policies.

How to Choose a Car Insurance Deductible

The first step in deciding on a car insurance deductible is to understand the concept — a deductible is essentially an out-of-pocket amount you must pay before your car insurance kicks in and covers repairs or medical bills.

Generally, the higher the deductible, the lower your monthly premiums will be. On the other hand, if you choose a high deductible, you’ll need to be able to cover that cost upfront if a car accident occurs.

Next, consider your financial situation when choosing a car insurance deductible. You should assess your available savings for any immediate expenses associated with auto accidents before committing to a certain deductible level.

For instance, if you have enough cash saved to cover any out-of-pocket costs associated with a higher deductible, you may choose to go with that option. However, if you can’t pay for the upfront costs associated with a high deductible, it’s best to stick with a lower deductible and accept slightly higher monthly premiums.

Finally, understand your risk tolerance and determine what type of coverage is necessary for your situation. Consider factors such as where you live and how often you drive when deciding on an appropriate deductible level.

If you live in an area prone to natural disasters or are worried about theft or vandalism, having a lower deductible may make sense because these types of incidents can be expensive to repair. Conversely, if you primarily use your car for short trips around town and are confident in your driving ability, a higher deductible may be the better option.

Ultimately, it is important to weigh all your options and make sure you select the right car insurance deductible for your needs.

What are some factors to consider when choosing a car insurance deductible?

While not every customer is the same, deciding how much to pay for a car insurance deductible will come down to these main factors:

Budget

Before deciding on which deductible to choose, it is important to consider your budget. Choosing a higher deductible typically comes with lower premiums. Still, it means you will have more out-of-pocket expenses if you need to make a claim.

Therefore, assessing your financial situation and being realistic about what you can afford should play an important role in picking the right auto insurance deductible.

Type of Car

The type of car you drive also plays impacts how much your deductible should be.

For instance, luxury cars are often more expensive to repair than economy vehicles and may require a higher insurance deductible. Similarly, cars that are more likely to be stolen or vandalized are riskier and more expensive to insure, so you may also need a higher deductible.

Driving Record

Your driving record is a major factor in choosing the right deductible for your car insurance policy. Drivers with high-risk characteristics such as multiple accidents or moving violations will likely be required to pay higher premiums and choose a higher deductible.

On the other hand, drivers with clean records may have more options when it comes to selecting deductibles.

Coverage Needed

Another important factor to consider when selecting an appropriate car insurance deductible is the type of coverage needed.

Different types of coverage offer different levels of protection and require different amounts of deductibles. For example, collision car insurance carries a deductible, while liability-only does not.

Risk Tolerance

Additionally, it is important to consider your own tolerance for risk when selecting a car insurance deductible. If you are willing to take on more financial responsibility in the event of an accident, then choosing a higher deductible could save you money in the form of lower premiums and vice versa.

Discounts & Special Rates

Many insurers offer discounts or special rates for higher deductibles, so it is worth checking with your insurer before making any decisions. Research can help determine which companies may offer better deals that fit your budget. Find out what you need to know about car insurance discounts in our comprehensive guide.

PIP Coverage Requirements

Depending on the state where you live, there may be certain personal injury protection (PIP) coverage minimums that you must meet in order to drive a vehicle legally.

As a result, your deductible selection may be affected by the PIP requirements of your state, and it is important to check local laws for more information.

Overall, taking the time to research each factor can help ensure you find the right deductible for your needs. Start with our guide to the best personal injury protection car insurance companies.

Does being at-fault play a role in paying a deductible?

When it comes to insurance claims, who is at fault or responsible for causing the damage is an important factor when determining who pays the deductible.

If you are determined to be at fault for an accident, then your own insurance policy will cover the cost of repairs minus any applicable deductible. Insurance companies in no-fault states might pay out regardless of fault if you have collision or comprehensive coverage, depending on where you live and the type of coverage you have.

When another driver is found to be at fault for an accident, their insurance policy should cover repair costs and other expenses related to the accident, such as medical bills and lost wages.

In certain situations, the other driver’s insurance company may also cover your deductible if you can prove that their insured was negligent or reckless in causing the accident.

It is important to note that your insurance policy might cover some of the repair costs when an at-fault driver doesn’t have enough or has no insurance. However, it will not cover any of the related expenses, such as medical bills and lost wages, unless you have the right insurance.

It is essential to ensure that you have adequate coverage on your own vehicle to be financially protected in the event of an accident.

Case Studies: Making Smart Choices With Car Insurance Deductibles

Case Study 1: The Savings Trade-Off

Amy was looking to reduce her monthly car insurance premiums and decided to increase her deductible from $500 to $1,000. By doing so, her insurance company offered her a significant discount, resulting in a monthly premium reduction of 20%.

Although she had to be prepared to pay a higher amount out of pocket in the event of an accident, Amy was confident in her ability to cover the deductible and was pleased with the overall savings she achieved.

Case Study 2: The Financial Safety Net

Mike wanted to ensure he had a safety net in case of any unforeseen accidents. He opted for a low deductible of $250, despite the higher monthly premium. One day, Mike got into a minor collision that caused significant damage to his car.

Thanks to his low deductible, he only had to pay $250 out of pocket, and his insurance company covered the rest of the repair costs, saving him thousands of dollars.

Case Study 3: The Risk-Taker

Sarah was a cautious driver and had never been involved in an accident before. She decided to take a risk and choose a high deductible of $2,000 in order to benefit from lower monthly premiums. However, a few months later, Sarah was rear-ended by another driver and her car required extensive repairs.

While she was initially concerned about the high out-of-pocket cost, she was relieved to discover that the other driver’s insurance would cover the damages, leaving her without any deductible payment.

Case Study 4: The Balanced Approach

John wanted to strike a balance between affordability and financial security. After careful consideration, he settled on a deductible of $500, which provided him with a reasonable premium and a manageable out-of-pocket cost in case of an accident.

This choice allowed him to have peace of mind knowing he was adequately protected without sacrificing his monthly budget.

Car Insurance Deductibles: The Bottom Line

Choosing the right car insurance deductible is an important decision. By considering each factor, you can make sure that you find the best option for your needs and budget.

It is also important to be aware of how being at fault in an accident may affect paying a deductible so that you are prepared if the situation arises. Researching and speaking with your insurance company can help you make the most informed decision when selecting your car insurance deductible.