Choosing a deductible amount on your car insurance policy can have a major impact on your policy premium and how much you’re responsible for paying if you’re involved in an accident. Your car insurance deductible is the amount you’d pay out of pocket for a collision or comprehensive claim to repair your car, while your insurance company pays the rest. So how should you choose your deductible limit? Bankrate has the answers. Show Lightbulb Bankrate Insight
How do auto insurance deductibles work?Full coverage includes comprehensive and collision, which cover damage to your vehicle. Collision coverage pays for damages caused by colliding with another vehicle, an object or a person. Comprehensive coverage pays for other forms of damage, like theft, vandalism, weather-related damage, fire and hitting an animal. Unlike liability coverage, both collision and comprehensive coverage have deductibles, which is the amount of a claim you agree to pay out of pocket. While you can choose the same deductible for both, they are independent of each other. For example, you could have a $100 comprehensive deductible and a $500 collision deductible. Imagine your car is parked outside when a hailstorm hits. Your car sustains $1,000 in damage and you have a $100 comprehensive deductible. Your auto insurance company will pay $900 of the claim and you will pay your $100 deductible. If you rear-end another vehicle, your liability coverage will pay for the other party’s damages and injuries, while your collision coverage will pay for the damages to your car. If you have a $2,500 repair bill and a $500 collision deductible, you’ll get a claim payout check of $2,000. Although commonly misinterpreted, your deductible is subtracted from your claim payout; you do not need to pay your deductible before your insurance company will issue a check. Both collision and comprehensive coverage pay without regard to fault. You can use your full coverage to fix your vehicle whether you caused an accident or another party did. How do car insurance deductibles impact premiums?Bankrate’s study of average car insurance premiums and deductible levels in over 35,000 ZIP codes nationwide confirmed that, generally, the higher your deductible, the lower your premium. Because you are willing to pay more in the event of a claim, insurance companies charge you less, though what may be surprising is that the difference is not always significant. Keep in mind, too, that our study focused on drivers with clean driving records. If you have an accident or ticket surcharging on your policy, you may see bigger savings by increasing your deductibles. While your deductible level can be a tool to help you control your insurance premiums, it isn’t always the most effective way to save on your car insurance.
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*Premium impact is adjusting deductibles from $500 comprehensive and collision deductible amounts Small changes to your deductible levels — like changing from a $250 comprehensive deductible to a $500 comprehensive deductible — only moderately change your premium. However, larger changes can have a bigger impact. If you have a $100 comprehensive deductible and a $500 collision deductible, increasing to $1,000 for both could save you nearly $350 per year, on average. What to consider when choosing your deductiblesPicking appropriate deductible levels is an important step in purchasing full coverage. If you choose levels that are too high, you may not be able to afford your deductibles, which means you won’t be able to finalize the claims process. But a deductible that is too low might mean paying more premium than you want to. Typically, insurance agents recommend that your comprehensive deductible be between $100 and $500. Comprehensive claims tend to be filed for less damage than collisions, so having a lower deductible is often logical. Collision deductibles can sometimes go as low as $100 or $250, but most agents recommend that you start at $500 and increase if you can afford to. When you are choosing your deductible, you might want to consider:
It may seem tricky to choose an appropriate deductible level. However, a bit of reflection into your financial situation, researching your car’s value and requesting quotes with various deductible choices could help you make a decision you feel comfortable with. Talking with a licensed agent can also be helpful. An agent can review your circumstances and help you choose deductible levels that suit your needs. MethodologyBankrate utilizes Quadrant Information Services to analyze 2021 rates for all ZIP codes and carriers in all 50 states and Washington, D.C. Quoted rates are based on a 40-year-old male and female driver with a clean driving record, good credit and the following full coverage limits:
Collision deductible: Rates were calculated by evaluating our base profile with the following deductible amounts applied: 500 and 1,000. Comprehensive deductible: Rates were calculated by evaluating our base profile with the following deductible amounts applied: 100, 250, 500 and 1,000. To determine minimum coverage limits, Bankrate used minimum coverage that meets each state’s requirements. Our base profile drivers own a 2019 Toyota Camry, commute five days a week and drive 12,000 miles annually. These are sample rates and should only be used for comparative purposes. |