How Do I Choose an Auto Insurance Deductible

All consumer interested in buying coverage will need to choose an auto insurance deductible. This is the amount that a policyholder agrees to pay him or herself. Auto insurance providers offer policies with deductibles at varying levels, ranging from $100-$1,000, depending on the state where the policy was issued.

When an accident causing physical damage to the vehicle occurs, the insurance company will pay for it, up to the amount of coverage listed on the policy. The policyholder is responsible for paying the policy deductible, and this amount is deducted from the insurance company’s portion. If the damage caused in an accident is $2,000 and the policy deductible is $500, the insurance company will pay $1,500 and the policyholder is responsible for the remaining $500.

Types of Auto Insurance Policy Deductibles

An auto insurance policy will have a policy deductible for the collision and comprehensive portions of the policy. The collision coverage pays for damage caused to the car when it strikes another object or someone hits the car and leaves the scene. Comprehensive insurance pays for damage caused by an event other than a collision, including:

  • Falling Objects
  • Fire
  • Hail
  • Hitting an animal
  • Theft
  • Vandalism
  • Wind

The deductible for each part of the policy does not have to be the same amount. For some policyholders, it may make sense to set a higher deductible for the collision part of the policy and keeping the deductible on the comprehensive coverage low.

Auto Insurance Deductible and Premium Rates

The level of the policy deductible has an impact on premium rates. Policyholders who agree to pay a higher amount toward settling a claim personally can qualify for lower premium rates. A person who decides to buy a policy with a $1,000 deductible will pay less for coverage than someone who has decided to limit the policy deductible to $100.

Choose an Auto Insurance Deductible

When shopping for auto insurance coverage, a driver should make a point of comparing rates for policies with different deductible levels. A consumer can go online to request quotes from a number of insurance companies. Once the quotes have been received, the driver should review them carefully by sorting them by deductible level. Taking the time for this step makes it easier to find the company which can provide the coverage the driver needs at the best rates.

An effective strategy for drivers who choose a high auto insurance deductible is to calculate how much they are saving each year and putting that amount of money into a savings account. The money can be used to pay the deductible if an accident or other type of loss occurs and the policyholder needs to make a claim.

This strategy will take some discipline, but it can make the financial cost of having to make a claim against an auto insurance policy a bit easier to manage. The drivers who will get the most benefit from putting the money they save in premiums aside are people who choose a policy with a high deductible.


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