Auto Insurance Deductible: Choosing the Amount to Purchase

The deductible is the amount you are responsible to pay before coverage is applied. Liability insurance carries no deductible but uninsured motorist coverage, collision and comprehensive insurance have one.

You can choose your own deductible amount. The typical deductibles range between $250 and $1,000. That means that each time you file a claim, you will be required to pay the deductible amount before coverage pays the remainder, up to limits.

While you don’t want to allow your insurance agent to choose your deductible amount for you, it is a good idea to give your agent a good idea of your financial situation so they can help you decide what you can and cannot afford. Paying less monthly may not be the most cost effective way to get coverage, if you have an accident. Also, what if you total your car and elected a deductible amount of $1,000? Will you be able to pay that amount right away? You will need to do so in order for insurance to cover the remainder so you can buy another car.

If you’re someone without an emergency fund, it’s highly advised that you choose a lower deductible amount. You’ll need one if you elect a high deductible. You should also do a self-assessment for risk. Do you drive during commute hours, late at night, or in areas that have lots of wildlife? Is your neighborhood a high-crime area? Has your car been broken into before? These are all factors you should consider when choosing a deductible for comprehensive and collision insurance.

Consider how you will feel if you get a fender bender that will cost $700 to fix but your deductible is $1,000. Always calculate different deductibles to see how much you’d save in premiums if you pay more. Ideally you will do this with an agent.

Some insurers offer a vanishing deductible which is very helpful to people who can maintain a clean driving record. Ask a trusted agent about these offering because most insurers do not offer it.