When you purchase a car insurance policy, one of the decisions you’ll have to make is how much you want for a deductible. Choosing a lower deductible will increase your monthly payments but reduce out-of-pocket expenses in the event of a claim, while higher deductibles will lower your monthly payments and increase what you need to pay following an accident or theft. While the average car insurance deductible is $500, there are many things to consider before deciding what amount is right for you.
How Does A Deductible Work
Auto insurance companies require most insureds to pay a small portion of the cost of a claim out of their own pocket. It is a way of sharing the risk between the policyholder and the provider, and helps ensure that policyholders don’t file unnecessary claims. If an insured needs to pay a portion of every claim from their own bank account, it means the policyholder has a stake in any claims they make. The amount of the deductible is chosen by the policyholder at the time they purchase the policy.
When you file a claim, the insurance adjuster subtracts the amount of the deductible that you chose from the amount of money the insurance company gives you for the damages. For example, if you get into an accident and the cost of repairs is $6,000, if you have a $500 deductible, you will receive $5,500 from the insurance company.
What Types of Auto Insurance Have Deductibles?
- Comprehensive. Comprehensive insurance usually has deductibles between $100 and $1,000. It covers damage from events outside of an accident and usually beyond your control, such as weather.
- Collision. Collision insurance usually has deductibles that range between $100 and $1,000. This coverage protects your car in the event of an accident.
- Personal Injury Protection. PIP deductibles range from $100 to $2,500. It covers medical expenses for you and the passengers in your vehicle.
- Uninsured Motorist Property Damage Coverage. Uninsured motorist property damage coverage has a deductible ranging from $100 to $1,000. It covers damage to your property have an accident with an uninsured or underinsured driver.
What Types of Auto Insurance Don’t Have Deductibles?
- Liability insurance. Liability never has a deductible. It covers damages you cause to another driver or their property in an accident.
- Uninsured motorist bodily injury coverage. Uninsured motorist bodily injury coverage usually does not have a deductible. It helps pay for your medical expenses if you get into an accident with an uninsured driver.
- Medical payments coverage. Medical payments coverage does not have a deductible. It helps pay for your medical expenses if you are injured in an accident.
What Is the Average Car Insurance Deductible?
In most cases, the average car insurance deductible is $500. For many claims, this is less than the cost of repairs if you get into an accident. If the cost of the repairs is less than $500, then you should not file a claim. Your insurance won’t pay for any repairs below the cost of the deductible, and if you file a claim, it might raise your premiums or disqualify you from a safe driver discount.
Other common deductible amounts include $250 and $1,000, and if you’re really worried about out-of-pocket expenses, you can even get a $0 deductible.
What To Take Into Consideration When Choosing Your Deductible
It’s important to know that the amount of your deductible will affect your monthly premiums. The lower your deductible, the higher you’ll have to pay in premiums because you have more coverage from the insurance company. You can expect to pay lower premiums if you choose a higher deductible.
Before deciding your deductible, take a look at your finances to determine how much money you can afford to pay out of pocket if you get into an accident and are found at fault. If you choose a $1,000 deductible and don’t have the money after an accident, you won’t be able to get your car fixed until you come up with it.
When you file the claim, the insurance company will send you a check or directly pay the mechanic for the cost of the repairs, minus the deductible. If you don’t have the extra money set aside, you won’t have sufficient funds to pay the repair shop.
Other things to consider when choosing a deductible include:
- Are you likely to file a claim?
- What is your car’s value? If you have an older car that’s worth under $5,000, it doesn’t make sense to have a $2,000 deductible unless you can significantly save money on your premiums.
- Do you have enough money in savings to cover the deductible?
- Are you a risk-taker, or are you risk averse?
- Do you have a loan or lease that requires a certain deductible?
Make sure to choose a deductible that you can come up with if you need to, but weigh the amount against the cost of your premiums.
When Don’t You Have to Pay a Deductible?
If you get into an accident and another driver is at fault, you do not have to pay a deductible. The other driver’s auto insurance company will pay for 100% of your repairs from their liability policy.
If you get into an accident and it’s not clear who is at fault, it might take some time to determine which insurance company is responsible. If it is taking too much time and you need your vehicle, you can use your own collision insurance policy to pay for your repairs. But if you do this, you’ll have to pay your deductible. If another driver is eventually deemed to be at fault, your insurance company will file a claim with their insurance company for a full reimbursement, which will include your deductible, and you’ll get your money back.
The Bottom Line About Average Car Insurance Deductibles
While $500 or $1,000 might be the most common deductibles for car insurance, when you choose yours it’s important to decide what is financially best for you. Raising your deductible might be an easy way to save on your monthly or annual premium, but weigh the odds to make sure it’s worth the risk. If you need to save money, there are other ways to lower your auto insurance premiums. Shop around, look for added discounts, or consider bundling your auto insurance with your home or renters insurance.
At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.