/images/2018/01/23/navina-side-hustle-mid_MPfEDfV.jpg)
/images/2019/12/06/smart_strategies_to_save_money_on_car_insurance.jpg)
/authors/christy_rakoczy_updated.png)
/authors/ashley-donohoe-headshot.jpg)
A few years ago, when my husband hit a deer on the way home from work, we turned to our comprehensive car insurance coverage to pay for the repairs. The cost to fix the car was around $6,500, and the insurance company cut us a check for $5,500.
The insurer wasn't trying to skip out on paying the bill. The company wrote us a check for $1,000 less than the repair cost because we were responsible for covering that amount. That was our deductible.
So, what is a deductible, how does it work, and how do you decide on how much of a car insurance deductible you are willing to pay?
What is a car insurance deductible?
A deductible is the amount a policyholder must pay out of their pocket when a covered loss happens, before the insurer pays the rest of the bills. Deductibles exist for various policies, including health and auto insurance. Deductibles make policyholders share the risk of loss with the insurer and they also deter policyholders from making small claims for minor issues. After all, if you have a $500 loss but a $500 deductible, it's not worth making a claim.
When you buy an auto insurance policy, you must pick your deductible. In our case, we chose a $1,000 deductible, but you can choose a different amount. You should think carefully, though, because the deductible amount affects your finances.
For example, if you choose a larger deductible, your monthly or annual insurance premiums are lower, but you'll face bigger expenses after a covered loss. A lower deductible requires paying higher premiums, but you'll pay less out of pocket if something goes wrong.
So, what is a high or a low deductible? Car insurers usually offer multiple deductible options, such as:
- $250
- $500
- $1,000
- $2,000
However, the specifics vary by company, and you may be able to opt for an even higher or lower deductible, like $100 or $2,500. Liberty Mutual indicates $500 is the most common deductible amount, but when you purchase your coverage, you'll decide what makes sense for you.
How a car insurance deductible works
Car insurance deductibles vary for different types of car insurance. For example, here's how they work for two types of protection:
- Collision coverage: Collision coverage pays for damages to your car if you cause a crash. Deductibles apply to this type of coverage, so if you cause an accident that results in $1,000 worth of damage and you have a $500 deductible, you pay $500 toward repairing your car, and your insurer does the same.
- Comprehensive coverage: This pays for non-crash-related damage to your car, including animal damage (like when my husband hit a deer). If someone steals your car, this coverage also pays for that. While a deductible applies to most claims made under comprehensive insurance, exceptions can apply. For example, you can often get windshield cracks repaired without paying a deductible.
Other types of insurance, such as liability coverage, are not subject to a deductible. This coverage pays the bills for someone else you harm in a crash. Since your insurer is paying the accident victim, it would make little sense for a deductible to apply.
When a deductible does apply, the amount is subtracted from what the insurer pays you. After my husband hit the deer, we received a payment from the insurer of $5,500, leaving us responsible for covering our $1,000 deductible. We paid our portion to the repair company out of our pocket, and the insurer's check covered the rest.
When I got a chip in my windshield a few years later, though, I had no deductible to pay since my comprehensive insurance covered the fix without the deductible applying. Also, when another driver hit my car years ago, their insurance paid for the full cost of my totaled car without requiring that I pay a deductible.
How your deductible impacts car insurance premiums
It may seem strange to choose a higher car insurance deductible and have to pay more out of pocket if an accident happens. However, it can make sense to do that sometimes.
Since an insurer takes on less risk when your deductible is higher, the insurance company charges you lower premiums. If you'd rather take a risk of bigger unexpected costs after a covered loss, a higher deductible may be right for you.
A lower deductible, on the other hand, means an insurance company covers more of the damage after a loss. They're also more likely to have to pay out since you can make claims for smaller amounts of damage. Since they're taking on more risk, they charge you higher premiums.
So, just how much does your deductible amount matter? Let's look at this example: This is a quote from Progressive for a 40-year-old single female driver who lives in Florida, drives a 2023 Ford Explorer, and purchases the state minimum liability insurance as well as comprehensive and collision coverage.
| Deductible Amount | Annual Premiums |
| $100 | $2,534 |
| $500 | $2,168 |
| $1,000 | $2,076 |
As you can see, choosing a higher deductible can save you hundreds of dollars per year. So, if you want to lower your car insurance costs, increasing your deductible can be the right move.
Get rewarded with savings for having a clean driving record.
Car insurance can be so simple. And so affordable.
Enjoy personalized policies, comprehensive coverage & more.
Drivers who switch their auto insurance and save with State Farm save $764 on average!
How much should your deductible for car insurance be?
There's no single best answer to how much your car insurance deductible should be, as there are different factors to consider in making this choice. You also have the option to change your deductible later, so the right amount may shift over time.
Here's what you should think about when picking a deductible amount that's right for you:
Examine your financial situation and risk tolerance
The cost of premiums and out-of-pocket expenses you can afford to pay will play a huge role in determining how big your deductible should be.
A higher deductible may be right for you if you have a sizable emergency fund and would rather pay lower monthly costs — despite the risk of big surprise out-of-pocket expenses in the event of a covered incident.
On the other hand, if you don't think you can come up with $500 or $1,000 in the event of an accident, you may prefer to pay a higher predictable amount each month so you don't have to.
Average rate:
Look at your vehicle's value
Your vehicle's value can also affect your deductible decision. If you have an expensive car that costs a lot to insure and repair, then a higher deductible may make good sense.
After all, you can save more on premiums each month. Additionally, if you can afford to splurge on an expensive car, then you can hopefully also afford to save some money to cover your deductible in case of an incident.
Consider the likelihood of filing a claim
You can also decide if you're willing to gamble on an accident not happening in the time it takes for your saved premiums to cover the deductible.
For example, based on our quotes above, switching from a $100 deductible to a $1,000 deductible saves you $458 per year — but you'd have to pay $900 more out of pocket if a covered loss happened. If you saved that $458 that you aren't spending on premiums for just under 2 years, you'd have the $900 extra you need to cover the higher deductible.
So, consider whether you're willing to take a chance that no accident will occur in the coming months — and whether you can trust yourself to actually bank the premium savings and leave the money alone in case an accident occurs.
Looking at your best driving record and statistics on local accident risks can help you determine if filing a claim is likely before you can save enough to cover deductible costs.
FAQs
Is it better to have a $500 deductible or $1,000?
Whether a $500 or $1,000 deductible is better depends on many factors, including whether you could pay $1,000 out of pocket after a covered claim, how much you save on your premiums, what premiums fit into your monthly budget, and how likely it is that you'll be involved in an accident.
What is the best deductible amount for car insurance?
The best deductible amount for car insurance depends on your needs. Data from Liberty Mutual shows that $500 is the most common deductible, but you may prefer a higher one if you prioritize low premiums and are fine with unexpected costs. You may prefer a lower one if you are risk-averse and don't want to take a chance that you'll have to pay a big bill if something goes wrong.
What is the downside of a high deductible?
The downside of a high insurance deductible is that you must pay a significant amount out of pocket when a covered loss occurs. The upside is that your monthly premiums will be lower over time because you chose a high-deductible policy.
Bottom line
Choosing the right auto insurance deductible is one of the keys to ensuring you're properly protected from risk when behind the wheel. Be sure to carefully weigh the pros and cons of a high versus a low deductible. Also, shop carefully for the best car insurance so you can get fair quotes from trusted companies on policies with deductibles of all sizes.
These quotes can help you make the right choices about which kinds of coverage you need, how high your deductible should be, and what level of protection you want in place to keep your assets safe in case something goes wrong while you're on the road.
Average rate:
Related Articles
/images/2025/04/22/woman_charges_electric_vehicle.png)
Lemonade Auto Insurance Review [2025]: Eco-Friendly Pay-Per-Mile Car Insurance
/images/2025/04/21/woman_places_phone_call_after_accident.png)
When You Get a Car Insurance Payout Instead of a Repair
/images/2025/04/10/smiling_woman_driving_a_car.png)
Best Ways to Get Car Insurance Quotes
/images/2025/04/10/person_looking_at_phone_while_leaning_out_of_car.png)
Does Paying Off Your Car Lower Insurance Costs?
/images/2025/04/14/couple_in_car.png)
Why Car Insurance Is Almost Always Cheaper When You’re Married
/images/2025/04/11/senior_driving_car.png)