Auto Insurance Deductibles: What's The Average?

The average car insurance deductible is $500, with common deductible amounts also including $250, $1,000, and $2,000. The deductible is the amount of money a driver has to pay out of pocket before their insurance policy will cover repair bills or medical expenses. When purchasing a car insurance policy, drivers select their deductible amount, which will then be subtracted from their claim payout in the event of an accident. A higher deductible results in a lower premium, and vice versa.

How does a deductible work?

A car insurance deductible is the amount of money you have to pay out of pocket before your insurance policy covers repair bills or medical expenses. In other words, it is the amount that a person must pay for repairs or replacement after an accident. The deductible amount will come out of the policyholder's pocket in the event of an at-fault car accident.

When you purchase your auto insurance policy, you select your deductible amount. 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 $7,000 to repair, you will receive $6,000 if you have a policy with a $1,000 deductible. For less expensive claims, you might decide to pay out of pocket rather than pay for the deductible.

There are two main types of auto insurance deductibles: collision deductibles and comprehensive 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.

The deductible amount you choose will affect your insurance premium. If you choose a higher deductible, you'll pay a lower premium. Conversely, a low deductible will increase the premium payments. If the policyholder does not have an at-fault accident resulting in a claim, they will have paid more for automobile insurance than someone with a higher deductible.

When deciding on a deductible amount, it's important 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. On the other hand, if you have substantial savings, you might prefer a lower deductible and slightly higher monthly payments to avoid having to come up with a larger sum in the event of an accident claim.

How to choose a deductible?

Choosing a car insurance deductible is a highly subjective decision that depends on several factors, including your financial situation, risk tolerance, and driving history. Here are some guidelines to help you select the right deductible for your needs:

• Evaluate your financial situation: Consider your savings and whether you can afford to pay a higher deductible in the event of a claim. If paying a high deductible would be a financial burden, opting for a lower deductible and higher monthly premiums may be more feasible.
• Assess your risk tolerance: Choosing a higher deductible means lower monthly premiums but higher out-of-pocket costs if you need to file a claim. Evaluate your comfort level with taking on this financial risk.
• Consider your driving history and habits: If you have a history of speeding tickets, accidents, or frequently drive in high-risk areas, you may be more likely to file insurance claims. In this case, a lower deductible with higher premiums may be more suitable. Conversely, if you have a clean driving record and safe driving habits, a higher deductible could be a good way to save on premiums.
• Determine the value of your car: If your car is older or has a lower value, choosing a plan with a lower deductible may be preferable. This is because the payout from your insurance company in the event of a total loss may not exceed the cost of repairs, even with a higher deductible.
• Understand the types of coverage: Different types of car insurance coverage have varying deductible requirements. For example, liability coverage, which is mandatory in most states, typically does not have a deductible, while comprehensive and collision coverage usually involve deductibles.
• Calculate cost differences: Compare quotes from different insurance companies and evaluate how different deductible amounts affect your rates. Consider the potential cost if you need to file one or multiple claims within a year.
• Consult a specialised insurance agent: They can help you make an informed decision based on your driving record, finances, and overall financial goals.

Remember, there is no one-size-fits-all answer when choosing a car insurance deductible. It's essential to carefully consider your circumstances and preferences to make the best choice for your needs.

When do you pay a deductible?

You pay a deductible when you make a claim for your car insurance. The deductible is the amount you pay out of pocket when you file a claim before your insurance coverage kicks in. You pay the deductible, and then your insurance company covers the remaining costs up to your policy limit.

For example, if you have a $500 deductible and your vehicle sustains $3,000 worth of damage, you pay the $500 deductible and your insurance company will pay the remaining $2,500.

There are some instances where you won't have to pay a deductible. If another driver is at fault, their liability coverage will cover your damages, and you won't have to pay anything. Similarly, if another driver files a claim against your liability insurance, you won't have to pay a deductible as liability coverage doesn't deal with deductibles.

The type of claim you're filing and who, if anyone, was at fault will determine whether you have to pay a deductible. For example, collision and comprehensive coverage claims usually require a deductible, whereas liability and medical payments coverage claims do not.

Deductibles are paid on a per-claim basis. So, if you have multiple covered claims in a year, you will pay a deductible each time.

How to avoid paying a deductible?

The average deductible for auto insurance is $500, but this can range from $250 to $2000. The deductible is the amount of money you have to pay out of pocket before your insurance policy will cover repair bills or medical expenses.

Choose Not to File a Claim

If your car is functional after an accident and has only cosmetic damage, you may choose not to file a claim until you have saved up enough money to cover the deductible. However, if the cost of repairs is greater than your deductible, you have the option to file a claim with your insurer.

Check Your Policy

Some insurance companies do not require you to pay your deductible upfront. They are willing to subtract your deductible from your claim money. In this case, you won't need to pay your deductible before having any repairs done. Check with your insurance agent to see if you are required to pay your deductible upfront.

Work Out a Deal with Your Mechanic

In rare cases, a mechanic might be willing to waive your deductible completely. Although it is unlikely, it is worth asking if this is an option. The mechanic could be making enough money off the repairs that they are willing to waive the deductible or let you make payments over a longer period.

Get a Vanishing Deductible Policy

A vanishing deductible is a policy feature offered by some insurance companies that decreases your deductible over time as long as you remain violation-free, accident-free, and/or claim-free. With most insurers that offer it, the vanishing deductible will apply to your collision and comprehensive insurance deductibles.

Drive Safely and Avoid Accidents

If you are in an accident that is not your fault, your costs will be covered by the other driver's liability insurance, which doesn't require you to pay anything out of pocket. However, if you choose to use your collision insurance or personal injury protection to cover immediate costs while fault is being determined, you will have to pay your deductible.

It's important to remember that it is almost impossible to avoid paying your deductible in situations where it applies, so choose a deductible amount that you can afford.

What is a good deductible?

Choosing a good deductible for auto insurance depends on a variety of factors, including your budget, your tolerance for risk, and the value of your car.

A car insurance deductible is the amount you pay out of pocket before your insurance carrier starts paying for repairs. The average auto insurance deductible is $500, but deductibles can range from $100 to $2,500, or even higher.

When choosing a deductible, it's important to consider how much you can comfortably afford to pay if your car is damaged. If you choose a high deductible, your insurance premium will be lower, but you'll have to pay more out of pocket if you need to make a claim. On the other hand, a low deductible means a higher premium, but you'll pay less if you need to make a claim.

For example, let's say you have a $1,000 deductible. If you have a $3,000 repair, you'll need to pay the first $1,000, and your insurance company will cover the remaining $2,000. If the repair costs less than your deductible, you'll have to pay the entire bill yourself.

If you have a lower-value car, it may make more sense to choose a lower deductible. That way, if your car is totaled, you'll get a higher payout from your insurance company. On the other hand, if you have a more expensive car, a higher deductible might be a better option, as it will lower your premium.

It's also important to consider your likelihood of filing a claim. If you have a history of accidents or engage in high-risk driving behaviours, you may be more likely to file a claim, and a lower deductible might be a better option.

Ultimately, there is no one-size-fits-all answer to what constitutes a good deductible. It depends on your individual circumstances and preferences. It's a good idea to speak to an insurance agent to get help weighing the various options and making the right selection for you.

Frequently asked questions