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How do deductibles impact your car insurance?

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When it comes to car insurance, there are certain factors you can’t control – but other things you can. A deductible is one part of the policy where some personal choice exists.

A car insurance deductible is specific to the portion of your policy the claim applies to; collision and comprehensive have their own deductibles. If your car is damaged, the deductible is subtracted from what you will receive from the insurer after filing your claim. In addition, raising or lowering car insurance deductibles can influence what you pay in premiums, too.

To get the most value from your car insurance policy, it is essential to understand how deductibles affect the cost of your coverage. That way, you can balance the pros and cons of changing them in order to better fit your financial needs.

How deductibles can impact your premiums

Typically, the higher the car insurance deductible you are willing to accept, the cheaper the premiums will be, as you are assuming more financial responsibility in the event of a claim. Conversely, if you have a lower deductible, your insurer assumes more financial responsibility and will therefore typically charge a higher rate for coverage.

If you have the financial buffer to account for the out-of-pocket costs of a claim but are looking for ways to trim monthly or annual costs, raising your auto insurance deductible may deliver significant savings. For example, increasing a deductible from $200 to $500 could reduce collision and comprehensive coverage costs by 15% to 30%, according to an estimate from the Insurance Information Institute (III). Moving up to a $1,000 collision or comprehensive deductible, the III says, might save you 40% or more.

But there are other factors that can contribute to the amount of premium savings you gain or lose by changing your car insurance deductible. For instance, more expensive vehicles may result in a higher premium that would not significantly be reduced by changing your deductible.

In addition, key issues like driving record, miles driven, location and claims frequency also impact your insurance premium over time – influencing how much of a bottom-line difference changing your deductible may make.

In fact, when comparing the impact of moving from a low deductible to a higher one, you may find that once you reach $1,000 or so, going higher (even if you switch carriers) will not return enough in premium savings to make it worthwhile.

As an example, assume that shifting from a $500 to $1,000 deductible shaves 20% off your annual premium of $900 – reducing it to $720. But recouping the $500 increase in deductible would take almost three years ($180 in annual premium savings x 3). If you are accident-free during that time, raising the deductible saves money. If not, that higher deductible may have cost you more.

To determine the best value, ask for pricing using several deductible options from your shortlist of providers you compare for quotes.

Minimum and maximum deductible limits

Minimum car insurance requirements vary by state, and insurers may offer a range of separate deductibles with minimum and maximum limits for both comprehensive and collision – the two main types of coverages that typically include deductibles. (There is no deductible on the liability coverage portion of a policy.)

Nationally, the average annual cost of car insurance in 2021 is $565 for minimum coverage, and $1,674 per year for full coverage, according to quoted premiums from Quadrant Information Services. Standard car insurance deductibles are $500 and $1,000, according to the III, but they can range as wide as $100 to $2,000 in some cases.

Options for setting a deductible may be limited, however, if you have a car loan or lease; most vehicle financing agreements require a maximum deductible for collision and comprehensive coverage – often no more than $500. This means you may be able to pick a lower amount if you prefer, but not a higher one, such as $1,000.

How deductibles can impact your claim

If your car is damaged and you file a claim, the deductible is subtracted from the amount your insurer will pay (up to your coverage limit). Say your policy is written with a $1,000 deductible. That recent fender-bender led to a claim for your SUV for damages totaling $3,500. The check you would receive from your insurer to cover the repairs will be $2,500 (not factoring in depreciation).

It is also important to remember that the car insurance deductible you choose applies every time you file a claim. So, if you have two separate accidents during a policy period, and you have a $500 comprehensive deductible, you would pay $500 each time, depending on the circumstances.

Sometimes, the type of claim impacts how or even if a deductible applies. In general, deductibles apply when there are covered damages to your car, and not when there are damages to another driver’s vehicle. If you are not at fault in an accident (and you do not live in a no-fault state), you should not have to pay a deductible for damage to your car. In that case, the other car’s driver covers your repairs through their insurance policy.

Pros and cons of changing your deductible

As with most things, there are trade offs to consider when altering your car insurance deductible. The consequences of your choice center on your comfort level with the ability to pay a portion of the costs of a claim vs. the premium savings you may gain from accepting more risk.

To help find the sweet spot — the ideal balance of premium and deductible expenses — here are some pros and cons to keep in mind when deciding whether to opt for a higher deductible.


  • Cheaper car insurance premiums: In many cases, raising your deductible has the potential to reduce premiums substantially, making the cost of car insurance more affordable.
  • Flexibility: Raising a deductible does not have to be a one-time, permanent policy declaration. You usually have the freedom to pick the amount that suits your budget — adopting a level that you and your insurance agent can reevaluate as circumstances change.
  • Cash flow for other needs: Having extra money from premium savings could help pad your emergency fund for other unanticipated expenses, or set aside money to cover that higher deductible before you ever need it.


  • Greater financial responsibility for claims: A higher deductible means you will pay more upfront for repairs should a claim happen, so it is important to make sure you can comfortably afford higher out-of-pocket costs. Plus, if the amount of damages is less than your deductible, you will have to shoulder the full cost.
  • Limited savings depending on your situation: As in our earlier example, it helps to do the math and compare potential savings because raising a deductible will not make sense in every case. That is why it can be a good idea to consider all the variables that contribute to the cost of your car insurance and explore different deductible vs. premium options from several car insurance carriers.
  • Less peace of mind: If the budget is tight and you would find it hard to pay a high sum every time a claim occurs while you wait for insurance reimbursement, having a higher deductible may not be worth the stress on your finances.
Written by
Susan J. Wells
Insurance Contributor
Susan J. Wells has years of experience as a journalist and content strategist for top-tier business and financial news sources (including Kiplinger and The New York Times) as well as leading Fortune 500 financial and insurance brands (including Fidelity Investments and Liberty Mutual). At, and other media, she writes about auto, annuity, commercial, flood, health, home, liability, life, long-term care, pet, renters, travel and valuables insurance markets – all geared to consumer and professional audiences.
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