What deductible for auto insurance?

When you're in the market for auto insurance, one of the first decisions you'll have to make is your deductible. On the surface, it may be just another routine decision, but it actually has a lot to do with how much you pay upfront and down the line if something happens to your car. In other words, your deductible is how much you're willing to pay for yourself before your insurance company covers the cost.

For example, suppose you get into an accident and it damages something to the tune of $4,000. If your deductible is $1,000, you pay $1,000, and your insurance company pays the other $3,000.

Selecting the proper deductible isn't necessarily cut and dry. It is based on your driving style, your budget, and how much risk you're willing to take on. Let's cut through it in a way that doesn't confuse.

What Does a Deductible Actually Cover?

Two deductibles in most auto policies are more important than any others: collision and comprehensive.

A collision deductible kicks in when your vehicle is involved in an accident either your fault or otherwise. A comprehensive deductible, however, kicks in for non-collision damage such as theft, vandalism, fire, hail, or even that wayward branch during a storm.

Liability coverage on your policy, which insures damage you do to other people typically does not have a deductible. That is done differently because it's based on legal liability.

How Deductibles Affect Your Premium

The connection between your premium and deductible is relatively straightforward: the higher your deductible, the lower your monthly premium, and the lower your deductible typically means a higher premium.

If you opt for a higher deductible, you're saying to your insurance company, "I'll pay more out of pocket if anything goes wrong," so they charge you lower premiums every month. Conversely, if you want the comfort of not being shocked with a huge bill after a collision, a lower deductible will provide that reassurance but at a greater monthly cost.

It's a matter of getting the proper balance for your budget and comfort level.

Which Deductible Do You Select?

There is no one-size-fits-all answer. What's "right" for you will depend on your financial buffer, where you drive and how much, and even the age and cost of your vehicle.

If you don't have much savings or reside in a high-traffic area where accidents are more likely  such as a big city then a lower deductible could be the way to go. You'll spend a little more each month, but you won't have a huge repair bill dumped in your lap if something happens.

Alternatively, if you don't drive much, have a good record, or have an older car, a higher deductible might be a good strategy to pay less for premiums in the long run. Just be sure you'd be okay with paying that amount out of pocket if you needed to.

Can You Change Your Deductible Later?

Yes. Most insurance providers will allow you to adjust your deductible at any time  not only upon renewal of policy. Individuals tend to review their deductible when their finances improve or when their car grows older and is less costly to repair or replace.

It is wise to review your coverage annually to ensure it remains appropriate for your situation.

A Few Things to Keep in Mind

While the deductible is an important component of your coverage, there are a few other details that are also good to know:

A few carriers provide additional, lower deductibles for certain repairs, such as repairing a damaged windshield or replacing auto glass. Those small repairs may even be covered with no deductible at all, depending on your carrier and state.

You may usually have different deductibles for collision and comprehensive coverage. For instance, you could have a $500 comprehensive deductible and a $1,000 collision deductible, based on what you feel at ease with for each risk.

If you’ve filed several claims in the past, your insurer might recommend or even require  a higher deductible as a way to keep your premium manageable. But be careful, as this also increases your out-of-pocket risk.

Still Not Sure What to Choose?

If you're torn between a high or low deductible, simply ask yourself one easy question: 

Could I afford to pay an unexpected repair bill of $1,000 or more? If not, then a lower deductible  although it will increase your monthly payment  may be worth it for peace of mind.

However, if you’ve got savings, rarely make claims, and want to cut down your insurance bill, going with a higher deductible could be the better choice.

Let’s Make It Easier

Auto insurance doesn't have to be complicated. Selecting a deductible has to do with knowing what you are comfortable with when it comes to risk, not simply running numbers. If you don't know, speaking with a professional will get you a solution that's for your pocket and your way of life, not merely for the insurance company.

Struggling to make a decision? Contact one of our insurance experts. We're here to make it easy.

FAQs

Q1:What do I do if I can't pay my deductible after a crash?

If you can't pay the deductible immediately, repairs may be delayed. Some repair shops have financing or payment plans, but it's always better to pick a deductible that you'd be able to afford in an emergency.

Q2:Does my deductible impact how quickly my claim is resolved?

Not typically. Your timing of payment can postpone repair work, but it does not slow down the speed with which your insurer will process the claim itself.