You might think your auto insurance is just another bill to pay, but it’s actually an essential part of your financial planning. Auto insurance can protect you from financial devastation if you cause an accident. Comprehensive coverage, which adds both comprehensive coverage and collision coverage to your policy, can also help protect you against repair and replacement costs if your car is damaged. If you have a loan or lease for your vehicle, you probably need to get comprehensive coverage, but you might want to consider it even if you own your car.
When you purchase comprehensive coverage, you must select a deductible for your comprehensive and collision insurance. Your auto insurance deductibles are the amount you will pay out of pocket if you file a claim for damage to your vehicle. In terms of insurance, your deductible is the amount of risk you are willing to take. The average cost of full coverage auto insurance with $ 500 full and collision deductibles is $ 1,674 per year. Understanding auto insurance deductibles could help you better decide what amounts to choose for your policy.
Overview of bank rates
- Your deductible levels affect your premium, but the change is usually not significant.
- Because comprehensive claims tend to be less expensive than collisions, most insurance agents recommend a lower overall deductible and a higher collision deductible.
- You want to consider your financial situation and the value of your car when choosing deductibles.
How Do Auto Insurance Deductibles Work?
Comprehensive coverage includes Comprehensive and Collision Coverage, which covers damage to your vehicle. Collision coverage covers damage caused by a collision with another vehicle, object or person. Comprehensive coverage covers other forms of damage, such as theft, vandalism, weather damage, fire, and hitting an animal. Unlike liability coverage, collision coverage and comprehensive coverage both have deductibles, which are the amount of a claim you agree to pay out of pocket. Although you can choose the same deductible for both, they are independent of each other. For example, you could have an aggregate deductible of $ 100 and a collision deductible of $ 500.
Imagine your car is parked outside when a hailstorm hits. Your car suffers damage of $ 1,000 and you have an aggregate deductible of $ 100. Your auto insurance company will pay $ 900 of the claim and you will pay your $ 100 deductible. If you overturn another vehicle, your liability insurance will cover damage and injury to the other party, while your collision insurance will cover damage to your car. If you have a repair bill of $ 2,500 and a collision deductible of $ 500, you will receive a refund check for $ 2,000. Although it is often misinterpreted, your deductible is subtracted from the payment of your claim; you don’t need to pay your deductible before your insurance company issues you a check.
Collision and Full Coverage pays no-fault. You can use your comprehensive coverage to repair your vehicle, whether you caused an accident or someone else did.
What is the impact of auto insurance deductibles on premiums?
Bankrate’s study of deductible levels in over 35,000 postcodes nationwide confirmed that, generally, the higher your deductible, the lower your premium. Because you’re prepared to pay more in the event of a loss, insurance companies charge you less, although what might be surprising is that the difference isn’t always significant. Also keep in mind that our study focused on drivers with good driving records. If you have an accident or an overload of tickets on your policy, you can realize greater savings by increasing your deductibles. While your deductible level can be a tool to help you control your insurance premiums, it is not always the most effective way to save on your auto insurance.
You might be tempted to choose high deductibles to save on your premium, but you should always consider how easily you will be able to pay the amount after a claim. If you choose a collision deductible of $ 1,000, but you might have a hard time paying $ 1,000 out of pocket if you damage your car, a lower deductible might make more sense. It may also be worth considering that you might be more tempted to file claims if you have lower deductibles, which can increase your rates over time.
The deductible levels you choose will depend heavily on your financial situation. If you can afford to pay a higher amount out of pocket, you can choose higher deductibles to lower your insurance costs. But if you’re having a hard time paying your deductibles, it can be a good sign that you need to choose a lower option, even though it might mean slightly higher premiums.
Average full coverage premium per deductible amount
|Full deductible / collision (amount $)||Average annual premium for full coverage||Impact on annual premiums|
|100/500||$ 1,806||+ $ 132|
|250/500||$ 1,725||+ $ 51|
|500/500||$ 1,674||$ 0|
|500/1000||$ 1,523||– $ 151|
|1000/1000||$ 1,459||-215 $|
* The impact of the premium adjusts the deductibles from the $ 500 deductible and collision amounts
Small changes to your deductible levels, like going from an overall deductible of $ 250 to an overall deductible of $ 500, only moderately change your premium. However, bigger changes can have a bigger impact. If you have an overall deductible of $ 100 and a collision deductible of $ 500, increasing to $ 1,000 for both could save you almost $ 350 per year, on average.
What to consider when choosing your deductibles
Choosing the right deductible levels is an important step in purchasing comprehensive coverage. If you choose levels that are too high, you may not be able to pay your deductibles, which means you will not be able to finalize the claims process. But too low a deductible can mean paying more premiums than you want.
Typically, insurance agents recommend that your overall deductible be between $ 100 and $ 500. Comprehensive claims tend to be filed for less damage than collisions, so it often makes sense to have a lower deductible. Collision deductibles can sometimes go as low as $ 100 or $ 250, but most agents recommend starting at $ 500 and increasing if you can afford it.
When choosing your deductible, you may want to consider:
- The actual cash surrender value of your vehicle: The value of your vehicle could help you decide on deductible levels. If your car is only worth $ 2,000, a $ 1,000 deductible would cover half of the insurance payment. As your vehicle ages, you may want to consider lowering your deductibles to account for the lower value.
- Your monthly or annual budget: Since your deductibles affect your premium, your budget can play a role in determining the amounts you choose. For example, if you don’t have any cash in reserve, a lower deductible might make sense. This way you will pay a little more each month instead of having a higher deductible if you make a claim. If you have enough savings to be comfortable paying more out of pocket in a claim, you could opt for a higher deductible to save on your premiums.
- Deductible supplements: There are optional franchise programs that you could take advantage of. A wiping deductible is a common option offered by auto insurers. This program will generally reduce your deductibles by a set amount for each year you have no claim, although the specifics vary by company. You may also have the option of choosing ‘full glass’ which means that regardless of your full deductible you will not pay anything if the only damage to your car is glass. This can be useful if you drive often and risk cracked or broken windshields and windows from road debris.
It can seem difficult to choose an appropriate level of deductible. However, a little thought about your financial situation, researching the value of your car, and requesting quotes with various franchise choices could help you make a decision that you feel comfortable with. Speaking with a licensed agent can also be helpful. An agent can review your situation and help you choose the deductible levels that suit your needs.
Bankrate uses Quadrant Information Services to analyze 2021 rates for all zip codes and carriers in all 50 states and Washington, DC Rates shown are based on a 40 year old male and female driver with a clean driving record, credit and the following comprehensive coverage limits:
- $ 100,000 liability for bodily injury per person
- $ 300,000 in civil liability for bodily injury per accident
- Civil liability for property damage of $ 50,000 per accident
- $ 100,000 in bodily injury caused by an uninsured motorist per person
- $ 300,000 in uninsured bodily injury per accident to a motorist
Collision deductible: The rates were calculated by evaluating our basic profile with the following deductible amounts applied: 500 and 1000.
Global deductible: The rates were calculated by evaluating our basic profile with the following deductible amounts applied: 100, 250, 500 and 1000.
To determine the minimum coverage limits, Bankrate used a minimum coverage that meets the requirements of each state. Our basic profile drivers own a 2019 Toyota Camry, commute five days a week and cover 12,000 miles a year.
These are sample rates and should only be used for comparison purposes.