What's A Good Deductible For Auto Insurance?

Updated October, 2020
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Your car insurance deductible is the set amount of money you have to pay towards car repairs. Average pricing ranges between $250-$1,000. The type of deductible you choose affects your price.

What kind of insurance requires a deductible?

There are two common insurance types that use deductibles:

  • Collision Insurance: No matter who's at fault, collision insurance covers your car after an accident.
  • Comprehensive Insurance: This insurance covers damage from things outside of your control. This includes fires, floods, and vandalism.

There are two other types of insurance that use deductibles:

  • Personal Injury Protection- PIP covers medical bills for you and your passengers. Some states require this type of insurance.
  • Uninsured/Underinsured Motorists- This type of coverage protects you when you’re hit by a driver who doesn’t have insurance. This also covers you when their insurance limits can’t cover the full amount of damage.

What deductible should I choose for car insurance?

Always pick a deductible amount that you would feel comfortable paying out-of-pocket. Outside of this, be sure to consider the value of your vehicle. A car that is valued at only $1,000 isn’t worth getting an $800 deductible for.

Deductibles usually range anywhere from $250- $1,000. The most common deductible amount is $500. Keep the below ratio in mind when choosing your deductible amount:

  • Lower deductible = Higher car insurance rate and lower out of pocket costs.
  • Higher deductible = Lower car insurance rate and higher out of pocket costs.

Factors and tips to consider

There are a number of factors to consider before choosing a deductible. Figure out the type of rate you should choose by reviewing the below factors.

  • Emergency Fund: Do you have an emergency fund saved up already? Your out-of-pocket expense is important to consider. While some insurers remove the deductible from the payout they send you, others require the deductible to be paid before they provide their portion of the payout.

If you don't have the funds readily available, you have to go without a car until you can pay it. Make sure you are prepared to pay your deductible out-of-pocket at all times.

  • Value Of Your Car: Considering the value of your car is important. Remember that a more expensive car, is more expensive to insure. So it also makes more sense to have a higher deductible on a more expensive vehicle, because the savings can be significant.

If you still want extensive coverage on your aging vehicle, a lower deductible would be a better option. As stated above, a high deductible of $1,000 wouldn't be helpful for a vehicle that is only worth $800-$1,200.

  • Overall Costs: Do the math. Calculate your collision deductible at both $500 and $1,000. What kind of difference does it make on your rate? Figure out the savings and calculate how long it takes the savings to add up to the $500 difference.

If you could save $500 in your premiums within 3 years, it's smarter to go with the higher deductible. This is because it's unlikely to have an accident during that time so it's worth the risk for the savings.

  • Your Risk: No matter how good of a driver you are, there's always some risk involved for a claim. Think about your own risk before deciding on a rate. For example: Do you drive a lot at peak hours? Do you drive back roads where deer frequent?

If your risk is high, it's probably better to consider a lower deductible.

It's important to pick the right car insurance deductible

Make sure you pick the best car insurance deductible for your needs. Don’t forget to consider your out-of-pocket capabilities, your vehicle’s worth, and the type of coverage.

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