Your auto insurance deductible is the amount of money you agree to pay before insurance contributes to covered damages. The higher your deductible, the lower your insurance premium. On the other hand, with a higher deductible, you will need to pay more out of pocket in the event of an accident.
Most car insurance policies include deductibles on collision and comprehensive coverage only. Collision coverage pays for your property damage from an accident, regardless of fault; comprehensive coverage pays for damage from theft, weather, vandalism, and wild animals — really, any event aside from a collision. Typically, collision coverage costs more than comprehensive coverage, so your collision deductible might affect your insurance premium more than your comprehensive deductible.
You can choose different deductibles for collision and comprehensive, also known as a split deductible. If you live in an area with a high risk of natural disasters, you may consider a lower deductible for comprehensive insurance. If you’re a safe driver and have never caused an accident, on the other hand, choosing a higher deductible for collision coverage will keep your auto insurance premium low.
When you sign up for auto insurance, you’ll pick the amount of your deductible from several options:
The average deductible for collision coverage is $5001.
The most important rule when choosing a deductible is to select an amount you feel comfortable paying within 24 hours. Small, unexpected expenses can be challenging for many. According to the Federal Reserve, more than 25 percent of adults were one $400 financial setback away from being unable to pay their bills in full in 20212.
Run the numbers on your auto insurance deductibles with your car insurance provider. If your savings account has a good amount of cushion, a higher deductible might be a good way to save money on your insurance premium.