How Deductibles Impact Car Insurance Rates

A higher car insurance deductible can lower your insurance premiums, but you will be responsible for paying a higher out-of-pocket amount if you file an applicable claim.
Written by Jaya Anandjit
Edited by Amy Bobinger
Reviewed by Brice Regling
A higher
deductible
on coverages like comprehensive or collision insurance can lower your
auto insurance
rates, but keep in mind that you will need to pay your deductible out-of-pocket before you receive your claim payout.

How car insurance deductibles work 

When you
file a claim
on a type of car insurance coverage that includes a deductible, your insurance provider will offer compensation for your claim payout, minus your deductible. To receive your claim payout, you will need to pay your deductible first. 
Car insurance deductibles do not apply to liability coverage, but common types of insurance that include a deductible are: 
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Collision coverage
: Covers repairs to your vehicle after a car accident, a collision with a stationary object, a hit-and-run, or damages caused by another vehicle crashing into your parked car.
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Comprehensive coverage
: Covers physical damage to your vehicle from non-accident occurrences, such as severe weather, falling objects, vandalism, and theft.
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Uninsured motorist
property damage coverage (UMPD): Covers your vehicle repairs following an accident with an at-fault uninsured driver.
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Personal injury protection (PIP)
: Covers medical bills and lost wages for you and your passengers after an accident.

Higher deductibles lower your insurance rates

A higher car insurance deductible can lower your car insurance premiums by 10 to 25% on average. 
Why? The higher your car insurance deductible is, the less your insurance provider will need to pay for a covered claim. Since a higher deductible poses less of a financial burden on insurance companies, insurers typically offer cheaper rates to policyholders who choose them. 
Auto insurance deductibles are typically offered in dollar amounts of $500 or $1,000. A deductible of $500 will likely result in higher insurance rates than a $1,000 deductible, but you’ll owe $500 less for a claim payout if you choose the lower deductible option. Alternatively, if you choose a $1,000 deductible, you’ll likely pay a lower insurance premium, but face higher out-of-pocket costs when you file a claim.
When purchasing collision, comprehensive, PIP, or UMPD coverage, be sure to compare quotes to assess the difference between your potential rates for an insurance policy with a higher deductible and lower deductible.
app screenshot
The
Jerry
app is a great tool for altering your coverage and deductibles to view personalized
car insurance quotes
, which can help you make the best decision for your policy—and budget—needs.

Is a higher deductible the right choice?

A higher deductible can
lower your insurance rates
, but the best deductible amount for your specific policy and driver profile will vary based on a few factors: 
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Can you afford a higher deductible? Since you will be responsible for higher out-of-pocket costs if you choose a steeper deductible, be sure that you can afford to pay your deductible if you file a claim. Assess your financial situation against the potential out-of-pocket expenses of a higher deductible. 
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How much lower is your rate with a higher deductible? Policyholders typically see the largest rate decrease when raising a deductible from $250 to $500, or from $500 to $1,000. If you’re considering raising your deductible over $1,000, you likely won’t see a valuable drop in your rates.
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Which coverage are you purchasing? You can choose different deductible limits for different types of coverage. For example, if you’re deciding on deductibles for collision and comprehensive coverage, it may be better to choose a higher deductible for collision coverage, but a lower deductible for comprehensive coverage. (Comprehensive coverage offers claim payouts for perils that are out of your control, and you may not want to pay a higher deductible to repair damages that you had nothing to do with.)
Pro Tip: Be sure to review the questions listed above, and talk to an insurance agent or use the
Jerry
app to compare quotes for policies with higher and lower deductibles before you finalize your decision. Looking at quotes for policies with varying deductibles will help you assess your potential rates based on your deductible selection, and decide if a higher deductible is truly worth a lower premium. 

FAQs

Is it better to have a $500 deductible or $1000?

A $500 deductible will likely result in higher premiums than a $1,000 deductible, but you will only need to pay $500 to receive your claim payout, rather than $1,000. If you can afford a $1,000 deductible, your car insurance premiums will be lower with this option. But if you’d rather pay less for your insurance claims, a $500 deductible may be the better choice. 

What is a car insurance deductible?

A car insurance deductible is the amount that a policyholder agrees to cover out-of-pocket before their insurer pays for a covered claim. Collision coverage, comprehensive insurance, personal injury protection (PIP), and uninsured motorist property damage coverage come with deductibles.

What is an advantage of high deductible car insurance?

The main advantage of having a high deductible is lower insurance costs. Higher deductibles take some of the financial burden of claims off the insurer, so policyholders with higher deductibles get cheaper car insurance rates. 

What is the disadvantage of having a higher deductible?

The main disadvantage of having a higher car insurance deductible is the higher out-of-pocket costs for a claim. For example, if you purchase collision insurance with a $1,000 deductible, you will need to pay $1,000 before you receive coverage for the remaining expenses of your collision coverage claim. 

Do I have to pay my car insurance deductible? 

Yes, you must pay your car insurance deductible if you file a claim for collision coverage, comprehensive coverage, personal injury protection, or—in most cases—uninsured motorist property damage coverage. If you don’t pay your deductible, your insurer will not provide coverage for your claim. 

Does full coverage car insurance have deductibles?

Yes,
full coverage
car insurance with collision and comprehensive coverage will have deductibles for each. 

How do car insurance deductibles work?

When you file a claim with your insurance provider for a type of car insurance coverage that includes a deductible, you will need to pay your deductible amount before your coverage kicks in to cover the rest of the claim. The deductible you choose will represent the amount of money you’ll need to pay.

Will a higher deductible lower my monthly premiums?

Yes, a higher deductible will lower your car insurance premiums, whether you opt for monthly billing or a pay-in-full bill. 

Are car insurance deductibles different from other insurance deductibles?

Yes, car insurance deductibles are different from renters insurance, homeowners insurance, and health insurance deductibles. While car insurance deductibles are dollar amounts, renters and homeowners insurance deductibles are percentage-based. Additionally, health insurance usually has an annual deductible limit, and includes coinsurance and copays, which you are also responsible for beyond your deductible. 

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