How to Choose the Best Car Insurance Deductible
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- What is it?
- Car value
- Driving risk
- Vanishing deductible
- Coverage types
- Affordable insurance
When choosing the best car insurance deductible, consider the value of your car and your driving risk. Also consider how much money you have in savings, and if you want a vanishing deductible.
Your deductible options and your premiums are also affected by your driving record. But whether you’re a good driver or a bad driver, Jerry can help you find a policy with the right deductible for you!
Also, if you want to save money on car insurance, the Jerry app is a good place to start.
A licensed broker, Jerry does all the hard work of finding the cheapest quotes from the top name-brand insurance companies and buying new car insurance. Jerry will even cancel your old policy for you.
Read on to learn about what to keep in mind when looking for the right deductible.
What is a deductible?
A deductible is the amount that you, the policyholder, will have to pay out of pocket in the event of an accident or damage to your car before your insurance will pay the remainder.
When choosing your car insurance policy, one of the most important things to consider is the deductible.
While deductibles can vary from company to company, the most common deductibles offered are either $500 or $1000.
The amount you opt for as your deductible will also help determine your premium. Your premium is the scheduled payments you make to your insurance company, whether every month or every six months. Opting for a higher deductible can mean paying a lower premium, and vice versa.
The value of your car
The current market value of your car can have a fairly significant influence on your premium, which in turn may play a part in the deductible you choose.
For example, more valuable cars generally cost more to insure and they will inevitably have a higher premium. You can offset this by opting for a higher deductible, which will result in a lower premium. This can save you more money in the long run
On the other hand, an older, less valuable car is usually cheaper to insure. A high deductible will eventually outpace the value of the car as it depreciates, so opting for a lower deductible makes more sense in the long run.
Key Takeaway More valuable cars are more expensive to insure, so you can save money over time with a higher deductible and a lower premium. Less valuable cars are cheaper to insure, so a lower deductible won’t result in a significantly more expensive premium.
Your driving risk
If you are a high-risk driver, you’ll want a lower deductible. Where you live and your driving habits are factors insurance companies take into consideration when calculating your driving risk.
When talking about driving risk, it has less to do with your driving record and more to do with how often you drive, how far, and in what area.
If you live, work, and commute in an area of high traffic with frequent accidents, or if you regularly travel great distances, you’re considered a higher-risk driver.
Every minute you spend on the road increases your driving risk.
This information is useful to both the insurance company and to you, the driver. The higher your risk, the lower you’ll want your deductible to be because it’s more likely that you could end up in an accident and will have to pay it.
How much money you have saved for emergencies
If you can afford to keep a healthy savings account for emergencies, it makes more sense to have a higher deductible, with a lower premium. Your savings fund should match or exceed your deductible.
Since deductibles are always footed by you, the policyholder, it’s important to consider how much money you could reasonably spend if the worst should happen.
But if saving money is difficult, shop around with Jerry to find insurance that has a premium you can afford with a reasonable deductible.
Consider a vanishing deductible
A vanishing deductible will start high but will reduce at a certain rate for every year of safe driving you record. It’s a reward for safe driving that offers great long-term savings.
However, there are some caveats. While this is an increasingly common insurance incentive, not every company offers one. Some of the companies that do offer a vanishing deductible also have a limit to how far down it can go.
Furthermore, a vanishing deductible can raise the cost of your premium, so it can be financially out of reach for some. Before signing up for a vanishing deductible, check into how it affects your premium.
If you rarely drive, a vanishing deductible isn’t particularly worthwhile either.
Key Takeaway A vanishing deductible is a great option for safe drivers who drive frequently. But if it raises the cost of your premium, it may not be worth it.
MORE: Types of Insurance
Different deductibles for different coverage
Different types of coverage have different deductibles.
Each type of insurance covers different kinds of damage and circumstances.
Liability coverage does not have a deductible Since liability will pay out for damages or injuries to other parties in an accident up to a certain limit. When that limit is reached, you are financially responsible for any expenses that are left.
Collision coverage covers damage done to your car in a moving accident, whether with another car or a stationary object, like a pole or wall. Because it deals with repairs that are often costly, collision premiums tend to be more expensive. It’s better to go for a higher deductible for collision coverage to save money over time.
Comprehensive coverage, on the other hand, deals with incidents that are not collisions, like vandalism. Because common comprehensive claims are on the cheaper side, the premium for comprehensive insurance tends to be cheaper.
Since basic repairs covered under comprehensive insurance can cost less than the deductible, such as windshield replacement, a lower deductible is the best direction.
Find affordable insurance
So when it comes time to build your coverage based on your needs, especially when the cost is a concern, having Jerry on your side can save you more than a headache.
Jerry does all the legwork of comparing quotes and deductibles across dozens of insurance companies to find you the coverage you need at a rate you can afford—all from the comfort of your pocket.
“Saved me literally $200 a month! I downloaded the app just because I was so tired of searching for affordable insurance. After a few minutes I finally got my quotes and my jaw literally dropped! And my deductibles were so low! I usually don’t rate apps, but this one deserved the five stars!” —Satisfied Jerry user
Is it better to have a $500 deductible or $1000?
It depends on what premium you can afford and the value of your car.
It’s also important to remember that deductibles aren’t met yearly - they apply to every incident and then start over. So if the $1000 deductible is not something you can comfortably cover, a $500 deductible may be the better way to go.
If you have frequent accidents or have a higher driving risk, $500 deductibles are better. If you rarely have accidents or a low driving risk, $1000 deductibles are better
What is a good deductible for auto insurance?
The average deductible options for auto insurance, either comprehensive or collision, are $500 or $1000, although there are other options. But as far as which one is “good” is ultimately up to your individual needs.
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