If you’re looking for ways to get cheap car insurance, you're in the right place. You’re also in the right spot if you're asking yourself, "What deductible should I choose for car insurance?"
Picking a different deductible could be your golden ticket to more affordable insurance. That’s because usually the higher the deductible you choose, the lower your premium for Collision and Comprehensive Coverage will be. We’ll explain!
What’s a Deductible?
Before we help you decide the best deductible to choose, it’s a good idea to go over the basics of auto insurance deductibles.
In addition to your car insurance premium, you also might have to pay what’s known as a deductible. A deductible is the amount of money you have to pay out of pocket before your insurance coverage kicks in.
Auto insurance coverage laws differ from state to state. The majority of states mandate that drivers carry Bodily Injury Liability and Property Damage Liability Coverages. Deductibles do not apply to liability coverage. However, in some states, other coverages like Personal Injury Protection or Uninsured Motorist Coverage might also allow for a deductible.
Today, we’re going to focus on the most common coverages that offer deductible options: Collision and Comprehensive (other than collision) Coverage.
Here’s How a Deductible Works
Let’s say you’re driving your car and ram into a small tree after hitting a pothole. You’re OK (although shaken up), but your car isn’t.
The repair shop says repairing your car will cost $2,000. If your deductible for Collision Coverage is $500, you’ll pay $500 out of pocket and your insurance company will take care of the remaining $1,500. If your deductible is $1,000, then you’ll be responsible for $1,000 and your insurer will pay the remaining bill.
With Collision Coverage, the deductible applies only to damage caused to your car, not someone else’s car. For example, let’s say you swerved into another car after hitting the tree. Your Property Damage Liability Coverage would come into play to pay for damages to the other driver’s car. Deductibles do not apply to liability coverage.
Similarly, if another driver causes damage to your vehicle, their liability coverage would pay for the damage to your car.
When you purchase optional Collision Coverage, you’ll also pick a deductible amount. As its name suggests, Collision Coverage pays for losses connected with a collision, like running into another car or plowing into a tree. It also covers damage resulting from a rollover accident.
Like Collision Coverage, Comprehensive Coverage is optional and includes a deductible. The "comprehensive" part of your policy covers damage caused by fire, floods, hail, wind, vandalism, theft, or running into an animal (such as a deer).
What's a Good Deductible for Auto Insurance?
Simply put, the higher your deductible is, the lower your Comprehensive and/or Collision premium will likely be. Going with a high deductible is one answer for how to lower car insurance.
But in exchange for that, you need to be prepared to have more money come out of your pocket if you wind up filing a Comprehensive or Collision claim.
The higher your deductible, the more of a financial risk you’re taking, so your deductible should never be higher than what you can afford. So, if you live in a rural area with little traffic, you might be more comfortable with a higher deductible than if you live in an urban area with more traffic. That’s because the likelihood of getting into a car crash or having your car stolen—and then filing a claim and needing to pay a deductible—is typically higher in an urban area.
Depending on how high your deductible is, you could save several hundred dollars a year on your car insurance premium. Savings typically are the greatest if your deductible is $500 or $1,000; a common deductible is $500.
Call 1-877-GO-DIRECT, click, or come in to your nearby Direct Auto Insurance today for help selecting the best deductible for your needs.