The average car insurance deductible is the average amount drivers pay upfront when they have to file a claim with their auto insurance providers. After you pay this amount, the insurance company covers the cost of the qualifying damage or loss. Choosing a car insurance deductible can have serious financial implications, so it’s important to weigh the various options with the help of an insurance agent to make the right selection for you and your family. The deductible can vary dramatically based on the amount of insurance you need, your driving history, the value of your vehicle, and other factors.
How Deductibles Work
You select your deductible amount when you purchase your auto insurance policy. Then, if you have a claim, the insurance adjuster subtracts the deductible from the claim you receive for damages. For example, if you have an accident and your car will cost $7000 to repair, you will receive $6000 if you have a policy with a $1000 deductible. For less expensive claims, you might decide to pay out of pocket rather than pay for the deductible.
When you choose a higher deductible for your policy, you will pay a lower premium for coverage. WalletHub notes that you can save about 6 percent by choosing a $2000 deductible instead of a $1000 deductible, which may or may not make sense depending on the price of your policy.
As Bankrate notes, you will not have to pay your deductible for a claim if another driver caused the accident. The other driver’s insurance company will pay for your claim in this case, and that driver will pay his or her deductible.
If you live in a no-fault auto insurance state, your insurance company must cover your medical bills regardless of who caused the accident. In this case, you likely have personal injury protection (PIP) coverage up to your state’s minimum for this purpose. As with other claims, you must pay your designated deductible when you file a PIP claim. These states have different laws about when you can sue an at-fault driver, usually in cases involving catastrophic injuries.
Average Car Insurance Deductibles
Generally, drivers tend to have average deductibles of $500. Common deductible amounts also include $250, $1000, and $2000, according to WalletHub. You can also select separate comprehensive and collision coverage deductibles. For example, you could have a $1000 collision and a $500 comprehensive policy deductible or vice versa.
MoneyGeek reviewed costs for an average 100/300/100 comprehensive and collision auto policy with different deductible amounts and found that with a $1000 deductible, the driver would pay about $1348 compared to $1456 per year for a similar driver who chose a $500 deductible.
WalletHub used a similar approach to get sample quotes from Progressive for a six-month collision insurance policy and found these averages:
- $84 per month for auto insurance with a $2000 deductible
- $89 per month with a $1000 deductible
- $129 per month with a $500 deductible
- $182 per month with a $250 deductible
- $250 per month with a $100 deductible
Choosing a Deductible Amount
Deciding on the best deductible for your needs requires you to consider both your budget constraints and your personal tolerance for risk. If you have a limited budget for auto insurance, a higher deductible might be more desirable because if you don’t have any claims, you won’t have to pay as much out of pocket for your policy. If you have substantial savings, you might prefer to have a lower deductible and slightly higher monthly payment to avoid having to come up with a larger sum in the event of an accident claim.
The Balance blog notes that you should also consider your likelihood of having a claim. Think about whether you typically drive at rush hour, have a long commute, often travel through busy intersections, or live in an area with a lot of deer or common weather events. In these instances and other high-risk situations, you should consider opting for a low deductible. Low-risk drivers who rarely file claims might be more comfortable with high-deductible policies.
When shopping for an auto insurance policy, ask each agent to provide you quotes with various deductibles. If you would not be able to recoup the cost of your deductible within three years of a claim with the lower premium, consider choosing a lower deductible policy.
The age and condition of your vehicle also play a role in the deductible decision. For example, if you have an old car worth $5000 or less, it does not make sense to have a $2000 deductible. Unless you can save significantly on your premium cost with a higher deductible, it usually makes sense to go low if you do not drive a new-model car.
If you do choose a high deductible, make sure you have money in the bank set aside because a claim can happen at any time. Your insurance company will not reduce or waive the cost of your deductible. They will write a check directly to your mechanic less the deductible cost. If you do not pay the remainder of the balance, the mechanic can legally keep your vehicle (although some businesses might agree to set up a payment plan with you). You cannot ask your mechanic to overcharge the insurance company to make up the deductible cost, a practice that constitutes insurance fraud.
In a situation where you do not have the money to repay your deductible to a mechanic, the insurance company will send you a check for the damage estimate minus the deductible. However, you would not have sufficient funds to repair the damage to the vehicle, which could significantly lower its value.
Types of Car Insurance Deductibles
MoneyGeek lists two main types of auto insurance deductibles. Collision deductibles take effect if you run into something with your car, such as another vehicle, a house, or a guardrail. Comprehensive deductibles apply to damage or loss claims resulting from extreme weather, theft, vandalism, and other non-collision events.
Understanding the average car insurance deductible and considerations when choosing a deductible amount can help you make a smart choice when you purchase your policy.
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