TL;DR: When choosing an auto insurance deductible, consider factors like your budget (how much you can pay out-of-pocket), your driving risk and habits, your vehicle’s value, and your environment. A higher deductible lowers your premium but means more cost to you in a claim, while a lower deductible means less surprise expense after an accident but higher premiums. The right choice is a deductible you could comfortably afford at any time. For personalized guidance, call Insure On The Spot at 773-202-5060.
Selecting the right car insurance deductible is an important decision that can impact both your monthly insurance cost and your expenses if an accident happens. There are several factors to consider when choosing your auto insurance deductible, from personal risk factors to financial considerations. Below, we break down common questions drivers ask about deductibles and provide clear answers to help you make an informed choice.
What is an auto insurance deductible and why is it important?
An auto insurance deductible is the amount you agree to pay out-of-pocket toward repairs or losses before your insurance coverage kicks in.
Basically, if you have a $500 deductible and you make a claim for $2,000 in damages, you pay the first $500 and your insurer covers the remaining $1,500. Deductibles are a way of sharing risk between you and the insurance company: you take on a portion of the cost, which helps prevent small or frivolous claims and can keep premiums lower.
Deductibles typically apply to collision and comprehensive coverage (the parts of your policy that cover damage to your own vehicle). Liability coverage, which pays for others’ damage when you are at fault, usually has no deductible. When buying or renewing your policy, you choose your deductible amount, and standard deductible options are around $250, $500, $1,000, or even higher. The deductible is important because it directly affects your insurance cost and potential expenses after an accident.
It’s a big balancing act that is more important than most assume. Choosing the right deductible ensures you’re not caught off guard financially. But if your deductible is too high for you to afford in a pinch, you might struggle to get your car repaired after an accident. However, if it’s very low, you’ll pay more each month for coverage than you may need to. The deductible essentially decides how much financial risk you’re willing to accept versus how much you want to pay upfront in premiums.
Here’s an example: Let’s say you run over a fallen tree branch and it causes $600 of damage to your car. If your deductible is $500, you’ll pay that amount, and insurance will cover the remaining $100. If your deductible is $1,000, you’d have to pay the entire $600 yourself because it’s below your deductible, meaning in that case you wouldn’t even file a claim. This example shows how the deductible can determine whether insurance pays out at all for a given incident.
How does a higher or lower deductible affect my insurance premium?
There’s a direct trade-off between your deductible and your premium. In short: the higher your deductible, the lower your monthly cost. The lower your deductible, the more you’ll pay each month.
Why? Because when you agree to pay more out of pocket in the event of a claim, the insurer takes on less risk. That means they can charge you less. If your deductible is low, the insurance company expects to foot more of the bill when something goes wrong, so they charge more upfront.
The Insurance Information Institute gives a good example. Let’s say you raise your auto deductible from $200 to $500. That move alone could cut your collision and comprehensive premiums by 15% to 30%. Push it to $1,000, and you might save 40% or more. Of course, those savings depend on your provider and your driving profile. But the rule stays the same: higher deductible, lower premium. And the opposite is true, too.
Ask your insurer or try an online quote tool to see how much you’d save. Sometimes the difference is noticeable. Other times, not so much.
Remember that these savings only apply to the parts of your policy that use a deductible, usually collision and comprehensive. Your total premium also includes other coverages, like liability, which aren’t affected by deductible choices. So even a big change to your deductible might only shave a portion off your full bill.
Bottom line? Don’t pick a deductible you can’t afford. If you’re tempted by a low premium and a sky-high deductible, make sure you have that cash on hand in case something happens. If not, you could be stuck in a bad spot after an accident. On the flip side, if you’d rather avoid large out-of-pocket costs, a lower deductible might be the better fit, even if it means paying more monthly.
To better illustrate this point, here’s how higher vs. lower deductibles typically play out:
| Higher Deductible (e.g. $1,000) | Lower Deductible (e.g. $250–$500) |
| Lower insurance premium – you pay less each month. | Higher insurance premium – you pay more each month for coverage. |
| Higher out-of-pocket cost in an accident – you must pay more before insurance pays anything. | Lower out-of-pocket cost after a claim – insurance kicks in sooner, so repairs cost you less upfront. |
| Good if you rarely have accidents and have funds saved for emergencies. | Good if you worry about accidents or prefer to minimize costs when something happens. |
| Risk: a major expense could strain your finances if an accident occurs before you’ve saved the deductible amount. | Risk: you might overpay in premiums if you never end up making a claim. |
How do my driving habits and risk level affect my deductible choice?
Your own driving history and habits are a major factor in choosing an appropriate deductible.
Start by asking yourself: How likely am I to have to file a claim? If you have a history of accidents or traffic violations, or if you tend to drive in ways or in conditions that make accidents more likely (for instance, a long daily commute in heavy traffic), you have a higher risk of needing to use your insurance. In that case, it might be wise to opt for a lower deductible, because you’re statistically more likely to face a situation where you’ll have to pay that deductible. A lower deductible means if an accident happens, you won’t have as large a burden out-of-pocket each time.
On the other hand, if you are a safe driver with a clean record, perhaps you’ve gone years without any accidents or claims – you might feel comfortable with a higher deductible. Safe or infrequent drivers are less likely to need to file claims, so they can take advantage of the lower premiums that come with a higher deductible. Essentially, you’re betting on yourself not to have an accident. For example, one insurance guide notes that if you drive cautiously and rarely get into accidents, you may be able to choose a higher deductible. Still, if you frequently get into accidents (or even regularly transport lots of passengers, which increases exposure), a lower deductible may be a better choice.
Consider your risk tolerance: Are you comfortable taking on more financial risk in exchange for saving on your premium? If yes, and you’re confident in your driving, a higher deductible could make sense. If not, or if your past suggests that accidents can happen to you, leaning toward a lower deductible might be prudent for peace of mind.
Also consider how often and how far you drive (“driving usage”). Someone who commutes 50 miles daily on busy highways faces more opportunities for accidents than someone who drives a few miles a week for errands. More exposure generally = higher chance of claims. A lower deductible could protect you from repeated significant expenses if you have high exposure. Conversely, if you use your car only occasionally, the likelihood of an incident is lower, which could justify a higher deductible and lower premium.
Edge case–multiple claims: If you have numerous accidents or claims in a short period, remember that the deductible applies each time. For each separate claim event, you’d owe the deductible amount. So, a high-risk driver with a high deductible could be hit with that large out-of-pocket cost every time something happens. A lower deductible might save you money despite the higher premium in such a scenario.
Be honest about your record and habits when picking your deductible. It’s one of the factors to consider when choosing your auto insurance deductible that can tip the scale toward high or low deductible based on how likely you think a claim will be.
Does the value of my vehicle affect which deductible I should choose?
The general rule is that if your car is newer or high-value, you may want to ensure it’s well-protected (which can mean a lower deductible so that even minor damage will be covered). If your car is older or not worth much, paying extra for a very low deductible or even for certain coverages might not be cost-effective.
If your car is only worth a few thousand dollars, carrying comprehensive and collision coverage with a $250 deductible might not make financial sense; the premiums for that coverage over a couple of years could approach the car’s value. Industry experts often suggest that if your car is worth less than 10 times the annual premium for comp and collision, it may be worth dropping those coverages altogether. In other words, an ancient car might be insured only for liability (no deductible needed in that case, since liability has none) rather than paying for full coverage. But suppose you keep collision and comprehensive coverage on a low-value car. In that case, you might choose a higher deductible to keep the premium low, acknowledging that you’d shoulder more of any repair costs.
Repairs can be highly costly to a new or expensive vehicle; even a minor fender-bender can rack up a hefty bill when high-end parts or sensors are involved. With an expensive car, you have more to lose in an accident, and you likely want to fix any damage. Therefore, choosing a lower deductible ensures that if something happens, your insurance will cover the majority of the repair costs and you won’t be deterred from making a claim due to a high out-of-pocket requirement. Some drivers of new cars feel more comfortable with $250 or $500 deductibles so that they can get their car repaired to like-new condition with minimal personal expense. Keep in mind, though, that the more valuable the car, the higher the collision/comprehensive premium will be – so a lower deductible on a luxury car will noticeably raise your premium. It’s a balance between protecting a valuable asset and controlling your insurance cost.
Tip: If you have a loan or lease on the car, your lender will likely require you to carry comprehensive and collision coverage (often called “full coverage”) and may even set a maximum deductible. Many lenders want a deductible of $500 or less, since a super high deductible could leave the car (their collateral) effectively under-protected. Lenders prefer lower deductibles on newer financed vehicles to ensure that repairs will be made and the vehicle’s value preserved. Check your finance or lease agreement – sometimes it specifies the highest deductible you can have. After the car is paid off, you have more flexibility to adjust coverage and deductible.
Should I consider my location and environment when selecting a deductible?
Take into consideration your environment–where you live and park and drive. That contributes to your risk exposure in ways that aren’t about your personal driving behavior. And these factors should influence your deductible choice too:
- Crime and theft rates: If you live in an area with frequent car thefts, break-ins, or vandalism, the chance of a comprehensive claim (for theft or non-collision damage) is higher. In a high-crime area, you might favor a lower comprehensive deductible so that if your car is stolen or damaged maliciously, you can replace or repair it with minimal cost to you. Conversely, in a very safe, low-crime area, you might feel comfortable with a higher deductible for those incidents.
- Weather and natural risks: Do you live in a region prone to hailstorms, floods, wildfires, or falling tree limbs? Comprehensive coverage covers those “acts of nature” type events. If your area sees frequent hail or severe weather that could damage your car, a lower deductible can be very helpful; otherwise, you might end up paying a lot out-of-pocket for each event (or choosing not to fix damage like dents). For example, if hail storms are common and you have a $1,000 deductible, minor hail damage might not meet your deductible and you’d eat the cost. With a $250 deductible, you’d be more likely to get insurance help fixing it. Similarly, if you don’t have covered parking and the environmental risk is high, leaning toward a lower deductible provides more protection.
- Urban vs. rural: City driving often comes with higher chances of accidents (more traffic, parking lot dings, etc.), as well as theft risk. Rural areas might have deer collisions or other considerations. Think about what perils are more likely around you. For instance, in a city with narrow streets and lots of accidents, a low collision deductible could save you a lot of headache. In a quieter area, you might gamble on a higher deductible.
Edge-case – glass damage: Many comprehensive claims are for windshield cracks or chipped glass due to road debris or weather. If these are common where you live (e.g. driving on gravel roads), note that some insurers offer special coverage or even $0 deductible programs for glass repair. Even if not, you might choose a lower comprehensive deductible specifically to cover glass damage. (Some insurers waive the deductible for minor windshield repairs so you fix chips promptly, but if you need a full replacement, your comp deductible would apply unless you have full glass coverage.)
How does my budget impact the deductible I choose?
Perhaps the most important factor you should consider when choosing the deductible is your personal budget and financial situation. The golden rule is: Never choose a deductible so high that you couldn’t comfortably pay it on short notice. After an accident, if you file a claim, the insurance company will expect you to pay your portion (the deductible) before they cover the rest. If that amount would strain your finances or you simply don’t have it available, you could be in a tough spot, your car might not get repaired, or you may have to scramble for funds or take on debt to cover it.
Ask yourself honestly, “If I had to pay $1,000 (or $500, or $1,500) tomorrow for a car repair, could I do it?” If the answer is no for a given number, that deductible is too high for you. As one insurer advises: “If you had to suddenly pay $1,000 out-of-pocket for a claim, could you afford it? If not, consider a lower deductible.”
On the other hand, if you have a healthy emergency fund or savings, you might be able to afford a higher deductible without financial strain. Some savvy drivers purposely take a higher deductible, then set aside the money they saved on premiums into an emergency account. Essentially, you self-insure that deductible amount. For example, say choosing a $1,000 deductible instead of $500 saves you $100 per year on premiums – you might bank that $100 (and more) each year so that after a few years, you’ve built up $1,000 in savings. Then you effectively can afford the $1,000 deductible if an accident happens, and you benefited from lower premiums in the meantime.
Monthly cash-flow vs. unexpected cost: This is the core of the budget consideration. If your budget is very tight month-to-month, you might lean towards a higher deductible to keep your insurance payments as low as possible – but you must recognize the risk that any accident means coming up with that large sum. If you have a bit more flexibility in your monthly budget, paying a slightly higher premium for a low deductible can serve as a form of “payment plan” for accidents, so you won’t face a big bill all at once after a crash. There is risk either way, so align the choice with what fits your budget and comfort level.
Tip: Whichever deductible you choose, try to budget for it. For example, if you choose a $500 deductible, have at least $500 set aside in your savings earmarked for “car emergency.” If you choose $1,000, aim to have that amount set aside. That way, you’re effectively prepared and your deductible decision won’t come back to bite you financially.
Can I change my deductible later if my situation changes?
Remember that you’re not locked into the same deductible forever.
It’s wise to revisit your deductible choice periodically, especially when your circumstances change. You can usually contact your insurance company to adjust your deductible at any time (though changes mid-policy may affect your premium). Many people reevaluate deductibles at policy renewal time each year. Here are some scenarios where you might want to change your deductible:
- Improved finances: If you originally chose a low deductible because money was tight, but now you have more savings or income, you might consider raising your deductible to save on premiums going forward. With more financial cushion, you can comfortably take on a bit more risk.
- Tighter finances: Conversely, if your financial situation has gotten worse or you dipped into savings, you may lower your deductible for more protection. For instance, after a job loss or other financial hit, you might not want a large unexpected expense, so paying a bit more per month for a lower deductible can provide peace of mind until your finances stabilize.
- Changes in driving habits: Maybe you moved closer to work or started working from home and now drive far less than you used to. With fewer miles on the road, your risk of an accident drops – this could be a good time to consider a higher deductible than you had, since an incident is less likely (and you’ll save on premiums). On the flip side, if you’ve started driving more (new longer commute, new teen driver in the household, etc.), you might lower your deductible because the risk has increased.
- Car value changes: As discussed, your car’s value declines over time. If you bought a brand-new car and chose a $250 deductible initially, a few years later that car’s value is lower and you might feel comfortable increasing the deductible to $500 or $1,000 to save money. The potential claim payout is smaller on an older car, so a higher deductible can make more sense then. Conversely, if you replace an old car with a new one, you might lower the deductible for better coverage on the more valuable vehicle.
- Lender requirements end: If you finish paying off an auto loan, you now have full control over coverage. You might decide at that point to raise deductibles or drop certain coverages if the car is older (where previously the lender forced you to keep low deductibles and full coverage).
Always communicate with your insurer about changes – they can tell you how a new deductible will change your premium before you commit to it. Why? Because you cannot change your deductible retroactively for an accident that already happened. So, make changes proactively as your life situation evolves, not in reaction to an imminent claim.
Regularly reviewing your policy, including deductible levels, is just good insurance hygiene. It ensures you always have the coverage that fits your current needs best. If you’re ever unsure whether your deductible is appropriate, reach out to your insurance agent or company for guidance – they can help weigh the pros and cons with you.
Do I have to pay my deductible if an accident wasn’t my fault?
This is a common question, and the answer depends on how the claim is handled, but in many cases you will not have to pay your deductible when you are not at fault.
Typically, suppose another driver hits you and their insurance accepts fault and pays for your damages. In that case, you do not pay a deductible; deductibles apply to your policy’s coverages, not someone else’s. The at-fault driver’s liability insurance would cover your repair costs, and no deductible would be involved on your side.
However, sometimes fault can take time to determine, or the other party’s insurance might be uncooperative. In such cases, you might get your car fixed through your collision coverage for speed and convenience, even if you weren’t at fault. If you go through your own insurer, you must pay your collision deductible up front. Later, suppose it’s confirmed that the other driver was at fault. In that case, your insurance may subrogate the claim, get reimbursed by the other party’s insurer, and then refund your deductible. But there’s a timing aspect; initially, you may pay it and get reimbursed weeks or months later.
In no-fault insurance states (which refers to injury coverage typically), your own policy might cover certain things regardless of fault, but when it comes to vehicle damage, fault still generally matters for who pays. If you carry uninsured motorist property damage coverage (for scenarios where an at-fault driver has no insurance), that coverage often has a small deductible (e.g. $250) that you’d pay if you have to use it. So if an uninsured driver hits you, you might pay that UMPD deductible, and your insurer covers the rest, then you’re done.
Also, note as Liberty Mutual points out: if you cause an accident but damage only someone else’s property (not your own car), you pay nothing out-of-pocket to fix their car – your liability coverage handles their damages with no deductible. Deductibles would only come into play for fixing your car in an at-fault scenario (collision deductible) or for other claims on your car.
What if my repair cost is smaller than my deductible?
If the cost to repair the damage is less than your deductible, then your insurance won’t pay anything, you’ll be covering the repairs out-of-pocket. In fact, in such cases you typically wouldn’t file a claim at all, because there’d be no payout (and filing a claim that doesn’t get paid still goes on your insurance record). For example, if you have a $1,000 deductible and accidentally scrape your car causing $300 of damage, it’s below your deductible threshold. You’d just pay the $300 yourself for the repair, and your insurance likely doesn’t need to be involved.
When choosing your deductible, this scenario is worth considering: a higher deductible means more minor incidents will fall below that line. If you choose a $1,000 deductible, any incident causing, say, $200, $500, $800 in damage will effectively be your responsibility entirely. With a $250 deductible, those same incidents would mostly be covered (after you pay $250). People sometimes decide on a lower deductible because they want even small mishaps to be covered by insurance. Others prefer a high deductible and plan to pay for minor things themselves, using insurance only for big events.
One thing to be aware of: even if damage is below your deductible, it’s wise to inform yourself of repair costs. Sometimes what looks like a tiny dent could hide more extensive damage. You don’t want to assume it’s under the deductible and not call insurance, only to find a $2,000 repair bill later. You can get an estimate from a body shop – if it’s indeed below your deductible, you handle it out-of-pocket and don’t involve insurance. If it’s above, then you can decide to file a claim and pay your deductible to get it covered.
Additionally, if you cause minor damage to someone else’s car, your liability coverage (which has no deductible) would pay for that, even if the cost is low – you wouldn’t pay a deductible for their damages. Deductibles only apply to damage to your own vehicle (collision/comprehensive claims).
Overall, having a higher deductible means you should be prepared to absorb the cost of all the little dings and repairs that are under that amount. Many drivers are fine with that since those smaller costs are manageable, and they prefer to save on premiums and avoid claim filings for minor issues. Just know the threshold you’re setting for involving insurance in a repair.
Frequently Asked Questions (FAQs)
What is a car insurance deductible in simple terms?
It’s the amount you pay out-of-pocket on a car insurance claim before your insurance covers the rest. For example, with a $500 deductible, you pay the first $500 in damage costs and insurance pays beyond that. It’s basically your share of the risk on any claim.
Is it better to have a higher deductible or a lower deductible?
Neither is inherently “better” – it depends on your situation. A higher deductible means a lower premium (cheaper insurance) but you’ll pay more if you have an accident. A lower deductible means a higher premium but less cost out-of-pocket after a claim. Choose a high deductible if you can afford a large expense unexpectedly and want to save on premiums; choose a low deductible if you want more financial protection when accidents happen and don’t mind paying extra each month.
How do I decide what deductible is right for me?
Consider your finances, driving risk, and comfort with risk. Pick an amount you could comfortably pay from savings if a claim arises. If $1,000 would wipe out your emergency fund or be hard to gather, go lower, like $500. If you have ample savings and rarely have accidents, you could opt for $1,000 or more to save on premiums. Also factor in your car’s value (an expensive car might warrant a lower deductible) and your environment (high-risk areas might favor a lower deductible). It’s a personal balance – the right deductible fits your budget and risk level.
Do I have to pay a deductible if the accident wasn’t my fault?
Generally no, not ultimately. If the other driver is at fault and their insurance pays for your damages, you won’t pay a deductible. If you use your own insurance first, you might pay your deductible to get repairs started, but your insurer will often get it reimbursed from the at-fault party’s insurer and then refund your deductible to you. The key point: deductibles apply to your insurance paying for your damages – when someone else’s insurance pays, no deductible comes into play on your end.
Can I change my insurance deductible later?
Yes. You can usually adjust your deductible any time or at least at renewal. People often raise or lower deductibles when their financial situation or vehicle changes. Just remember, any change only applies to future claims – you can’t change the deductible to affect an already-occurred accident. Contact your insurer to find out how a new deductible would change your premium, and they can update your policy accordingly.
What are common deductible amounts for auto insurance?
The most common choices are around $500 and $1,000. Many drivers choose $500 as a middle ground. Other typical options include $250 on the lower end, or $1,500 and $2,000 on the higher end (these higher options can further lower premiums but are less common). Not all companies offer all amounts, but you’ll usually be offered a range like $250, $500, $1,000, $2,000. Pick one of those that best match your needs.
If my car is older, should I even have a high deductible (or any deductible)?
For an older, low-value car, you might decide not to carry collision or comprehensive coverage at all (and therefore no deductible) if the car isn’t worth the cost of insurance. If you do keep full coverage, a high deductible can keep the premium low. Essentially, ask if paying for extensive coverage on that car is worth it – if the car is only worth a couple thousand dollars, it might make sense to just have liability coverage and save money, or use a higher deductible to reduce premiums because small claims wouldn’t be worth filing.
Does every claim have a deductible?
No. Liability claims (when your insurance pays for someone else’s damage/injuries) typically have no deductible – you don’t pay anything out-of-pocket in those scenarios. Deductibles mainly apply to claims for your own car’s damage under collision or comprehensive coverage. Also, certain coverages can have no deductible or special deductibles (for example, some policies have no deductible for windshield chip repairs, or a small deductible for uninsured motorist property damage). Always check your policy, but the standard is: collision and comprehensive have a deductible, other coverages usually don’t.
What happens if I can’t afford my deductible after an accident?
If you cannot pay the deductible, the repair shop might not release your car until you pay your share, since the insurance company only pays their portion. Not having the deductible means you might have to delay repairs or find alternate funds (credit card, borrowing, etc.). It’s a tough spot – that’s why choosing a deductible you know you can pay is recommended, or keeping savings earmarked for it. In some cases, if the accident wasn’t your fault, as noted, you might pursue the claim through the other party’s insurance to avoid using your own coverage (hence avoiding your deductible). But if it’s your claim, the insurer won’t cover your part. Some repair shops might offer payment plans for your deductible, but that varies. Bottom line: plan ahead so you’re prepared; otherwise, a too-high deductible can leave you in a bind when you need your car fixed.