How to Choose the Right Car Insurance Deductible

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How to Choose the Right Car Insurance Deductible

If you’re ever in a car accident, it can be incredibly stressful and even traumatic. It’s important that you’re proactive in ensuring you have the right car insurance for your needs.

accidents are incredibly common. Factors that contribute to accidents include hazardous weather or the negligence of another person. For example, a motorist driving while fatigued can contribute to a high risk of an accident.

One of the big considerations when choosing car insurance or shopping around is how much your deductible should be.

The following are things that can guide your decision for right car insurance.

What is a Deductible?

First, what is a deductible on the right car insurance?

A deductible is how much money you’ll pay out-of-pocket before your car insurance kicks in and pays the rest of your claim. The rest of the claim is paid up to the pre-set coverage limits of your policy.

An example is this—you file a claim for $1,500 following an accident. You have a $500 deductible. That means you have to pay the $500 before your insurer covers the balance of $1,000.

A deductible is not a premium. The policy premium is the amount you pay to your insurer for your policy. It’s a recurring fee to keep the policy up.

Types of Deductibles

With car insurance, there are two main types of deductibles. There are three types of insurance, on the other hand, which are liability, collision, and comprehensive. Liability insurance doesn’t have a deductible, but comprehensive and collision do.

Collision insurance protects you if you run into something, such as a house, mailbox, or another car.

Comprehensive fills in collision insurance gaps and can provide coverage for situations outside of a collision such as theft or vandalism.

How Much Does is the Average Deductible?

The average deductible for most drivers is $500. You can choose a policy with deductibles ranging from $250 to $2,000, however.

You might be able to choose a different deductible amount for your collision versus your comprehensive coverage.

You might do a lower deductible for comprehensive and a higher deductible for collision.

For example, some people will have a $100 deductible on their comprehensive coverage and a $500 deductible on their collision insurance.

How to Decide

The following are some of the factors to consider when choosing your deductible.

  • Would you rather pay less for repairs or insurance? If you have a higher deductible, your premium will be lower. If you need repairs, you’ll pay more out-of-pocket and the same is true in the opposite direction.
  • How much can you afford to pay-out-of-pocket if that becomes necessary? If you have a large amount of savings, you might want a higher deductible, and then you can pay less for your premium each month. You don’t want to be in an accident, which is already stressful, and then find yourself scrambling to come up with a deductible if you don’t have savings.
  • Are you likely to be in an accident? Some people have a more extensive history of accidents, and if that’s you, you might want a lower deductible.
  • Does your lease or lien require a specific deductible? If you have a car loan or a lease, you might be required to have a specific deductible by your lender. Most loans and leases require, at most, a $500 deductible.
Do You Always Have to Pay a Deductible?

There are some situations, although limited, where you wouldn’t pay your deductible.

One example is if the other driver is atfault.

If someone is at-fault in a collision with you and they’re insured, you will probably not have to pay your deductible. The claim is being made against their insurance—not yours. Deductibles only apply when you’re claiming damages with your insurer.

If someone else has to pay for your repairs, they have to pay a deductible.

You might also decide not to get your car repaired, in which case you wouldn’t have to pay a deductible.

Also, as was touched on, a deductible doesn’t apply to liability insurance.

Liability insurance covers the damage you cause to other property or people.

It can be tempting when choosing right car insurance to go with a higher deductible because in the moment you’re then going to be paying less on your premiums. You need to think long-term about this decision, however. You need to consider a low deductible if it’s coverage for a high-risk driver such as a teen.

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