Insurance » Auto Insurance » Should I Have a $500 or $1000 Auto Insurance Deductible
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Should I Have a $500 or $1000 Auto Insurance Deductible

Low car insurance deductible can be beneficial in some cases - but risky in others. What's the right amount for you and which factor you should consider?

You can trust the integrity of our unbiased, independent editorial staff. We may, however, receive compensation from the issuers of some products mentioned in this article. Our opinions are our own.

Table Of Content

What Is a Car Insurance Deductible?

We’re going to start out by taking a look at your insurance deductible. When you look at your car insurance and it tells you that you have a deductible that means it’s an amount you pay. And not only do you pay that amount but you pay it before the insurance pays anything. This is something to consider if you ever have a claim or think you do.

If you have a repair for your vehicle that will cost $1,000 and your deductible is $500 you’ll end up paying that $500 and then they’ll pay $500. If your repair is only $600 though you may want to reconsider turning it in. Your insurance will pay the $100 but they’ll probably raise your insurance as well.

With a deductible, your insurance company is giving you some of the responsibility for your vehicle. They want to make sure they don’t have to pay quite as much for whatever happens to your vehicle. Keep in mind that you’re going to pay the deductible for specific parts of your insurance. Other parts may not have a deductible at all.

Premiums Vs Deductible 

If you set up a lower premium you’re generally going to have a higher deductible to pay. If you agree to a high premium you’ll get a lower deductible. Low deductible means your insurance company is on the hook for more of the damage if there’s a problem, so they charge you upfront.

If you have a $500 deductible your insurance company pays for anything over that amount. If you have a $1,000 deductible your insurance pays for anything over that amount.

That $500 difference in your deductible could make a big difference in your premiums. And the lower the deductible you want the higher your premium could go.

For some people having a lower premium each month is worth the high deductible. If you’re involved in an accident you may be able to come up with that money for the deductible. If you have a lot of claims, however, you might want to go with a higher premium and a low deductible.

What Deductible Do I Need?

When it comes to your deductible you want to make sure you know what you’re getting into. You may want to get a high deductible so that you can lower your premium.

In fact, increase your deductible from $200 to $500 could help you save as much as 25% on your premium. If you increase that again to $1,000 you could save as much as 50%.

That’s going to be a whole lot of money that you can save every month. But keep in mind that your insurance might be slightly different. They may offer you different options or benefits to higher deductibles. You can take a look at some insurance comparison tools to find out more. And you can talk with your insurance company as well.

Make sure you evaluate just how long it will take you to get the benefits of that difference. How much would you have to use your insurance to make it worthwhile to have that lower deductible plan over the higher deductible one? This will help you decide if you’re making the best decision.

Factors To Consider When Choosing Auto Insurance Deductibles

Here are the main important factors to pay attention when deciding your car insurance deductible:

Savings vs. Risk

How much money are you going to save each year by having that lower premium? Now, how much is it going to cost you if you have to make a claim? Think about the last time you had to make a claim and assume that’s how many years until you make your next claim.

How much money are you saving on premiums for that length of time and how much will the claim cost you? Is it going to be worth it for you to save that money over the long run? Are you going to end up in even more financial trouble in the end?

Vehicle Value

How much money is your vehicle actually worth? If it’s not worth much then you don’t need as much coverage. You may also want to save some money on premiums for a high end car (since they’ll be expensive for other reasons). That means you may agree to a high deductible so you can cut costs slightly.

Some people really want to have as much coverage as possible, even if their vehicle is old or not in the best shape. Having a low deductible is generally the best way to go because your vehicle may not be worth the high deductible. Or you could drop some of the coverage entirely.

Personal Risk

Are you likely to make a claim on your insurance? If you’ve made a lot of claims before then you’re more likely to make a claim again. Also, if you’re constantly driving in busy areas you are more at risk. And that’s true no matter how safe of a driver you are.

If you have high personal risk you may want to get a low deductible. This will protect you in case one of those near misses turns into a problem. On the other hand, you could leverage your low risk to get a high deductible and save some money just in case.

Cost-Effectiveness

Can you afford the deductible if something goes wrong? If you have to make a claim can you come up with the money that you are responsible for?

You want to know that you can pay off the expense. If you can’t then you need to lower the deductible instead and you may need to come up with higher premiums.

Own or Lease

If you lease a vehicle or you have a loan on it you may want to get a lower deductible.

On the other hand, once you own the vehicle you may be willing to take on a higher deductible. After all, when it’s a loan or a lease you are responsible for getting it to like new condition. If it’s yours you have some leeway. 

How Do I Compare Car Insurance Plans?

It is important that you carefully compare your insurance plans once you have received your quotes to get the best company for your needs. It can be difficult to read through all the technical and legal jargon included in each quote. It is easy to follow.

  • Get your quotes together – If you don't have all the relevant information, it is difficult to compare different insurance products. Do not assume you will remember every detail for each quote. Comparing quotes online is easy. However, you can print each quote so that you can compare them.
  • See what the Quotes Are Like For Like – It is crucial to determine the coverage you require and make sure all quotes are accurate. It is not a good idea to compare a basic liability policy with a comprehensive coverage quote and assume that the cheaper one is better. Make sure you get the coverage that you want from all of your quotes.
  • Take a look at the Deductibles – Your overall insurance cost can be affected by the amount of your deductible. You should ensure that the deductible is the same for both types of insurance. You will have to decide whether you are willing or not to pay a higher deductible if there is a claim.
  • Get eligible discounts – You should also check to see if there are any discounts that you may be eligible for. Although discounts may vary between insurers, it is not uncommon to receive discounts for vehicles that have anti-theft or safety features, good drivers, or students. Bundling your insurance policies may be eligible for a discount.

How Difficult is it to Compare Auto Insurance?

Comparing auto insurance can be difficult because your situation is unique and different insurers might approach it differently. It is not possible to compare insurance quotes using a standard format.

Also, you will need to consider what is most important for you. So, if one quote is cheaper, but has less coverage or a higher deductible, you will need to decide if you are willing to make the compromise.

A second problem is the difficulty many people have in understanding all the insurance and legal terminology. This can be overcome by focusing on the parameters we have described above. This will enable you to quickly scan the quote and identify the key points.

Online auto insurance brokers may be a good option if you still have difficulty comparing auto insurance. You can fill out one form and receive multiple product options. The quote details are usually presented in a table format so that you can quickly scan them. If you wish to find out more, click the link.

How Does A Speeding Ticket Affect Auto Insurance

Speeding tickets are part of your driving record, and insurers will check your driving record to determine your risk level. If you have driving violations, there is a greater chance of you being sued or in an accident.

Your auto insurance costs will rise if you have more violations than usual. You may be considered a high-risk driver if you are convicted of speeding. This could lead to higher insurance costs, even if there has been no claim.

Over a million drivers are arrested for a DUI each year in the US. This offense not only carries fines and other penalties, but it also impacts the cost of car insurance. In this chart using The Zebra data, you can see the cost of car insurance almost doubles after a DUI for both minimum coverage and full coverage. This means that you can expect to pay an average of over $3,100 compared to approximately $1,600 if you had a clean driving record.

How Much a DUI Raises Average Car Insurance Costs (1)

More Auto Insurance Terms You Should Know

Many people find insurance terminology overwhelming, as we have already mentioned. But, if you want to get the best deal, you need to have a basic understanding of at least some of the common terms.

These are the terms of auto insurance you need to know:

  • Declarations Page – This is the coverage summary. This will provide details about the coverage, including the limitations, costs and actual vehicle covered. To compare new quotes with your current policy, you can refer to the declarations page.
  • PIP – Personal Injury Protection is the minimum coverage required in all states. Your state will determine the details, but PIP generally covers lost wages, medical costs, funeral costs and any essential services you are unable to perform due to your injuries.
  • SR-22 – This certificate is also known by the acronym CFR (Certificate of Financial Responsibility). This is proof of insurance for people who have their driver's license suspended. The DMV will notify you that you must file an SR-22 if you have been convicted of a DUI or other serious offense. The paperwork will be filed by your insurer. You could then be reclassified as higher risk driver for at most three years.
  • Gap insurance – We all know that new vehicles instantly begin to decrease in value. Gap insurance covers the difference between the amount you owe and the actual value of your vehicle. If your vehicle is worth $50,000 but your loan balance drops to $40,000 in six months, it could still be owed $45,000 If your vehicle is totaled, an insurance policy would pay $40,000 but you would owe $5,000. This would make it necessary to have gap insurance.

Bottom Line

When it comes down to it you want to pay attention to your own needs and wants. Maybe you don’t want to be responsible for as much if there’s an accident. In that case you can opt for a higher premium and lower deductible. If you want to keep your monthly costs down you may want to opt for a higher deductible instead.

The decision that you make is up to you. And it’s also going to be up to your personal preference. After all, you want to make sure you can afford it. If you can’t afford a large payment every month you may have to go with a low premium and high deductible.

If you know you couldn’t come up with a large, lump-sum if there’s an accident then you may need to go with a higher premium and lower deductible.

Pay attention also to your own risk level, your driving record, your coverage and more.

All of these things will help you figure out the right balance of deductible and premium. And talking with a professional will help you as well. You’ll be able to decrease your expenses in a way that makes the most sense for you. Just make sure you know what you’re doing and how it’s going to affect your budget. Changing your deductible could make a huge difference for your monthly bills. But if it would destroy your finances if you make a claim it’s not going to be worth it.

FAQs

It shouldn't be difficult to review your car insurance if your company provides you with a full printout or explanation of what each policy feature means. Reviewing your car insurance is a good idea because it will reveal whether you require more or less coverage.

However, there may be some clauses or parts of the insurance that you do not understand. In this case, it may be in your best interests to contact your car insurance policy provider and have them explain what the part of the insurance claims means. The main thing to consider are the deductibles and the amount of monetary coverage you have for liability and personal protection.

Liability insurance is the most affordable type of insurance, and it is required in the majority of states for all drivers. Third-party insurance is the bare minimum required by law. It is the cheapest because it provides the least amount of protection of any type of insurance available.

Having the cheapest option, however, is not always the best option. You should think about paying a higher premium if it means having more coverage and a lower deductible. This will protect you if you are in an accident and require assistance.

If you have received a speeding ticket, there are several options for compensating for it and lowering your insurance rates. The most obvious is to keep an accident-free record and avoid getting any more tickets.

You can also improve your credit and reduce your insurance coverage. Consider raising your deductible if possible, as this will result in a lower rate. Finally, check with your insurer to see if you are eligible for any additional discounts.

Car insurance comparison shopping can be accomplished in a few easy steps and in a short amount of time. The first step is to gather all of your documents and have them ready so that you can enter information about yourself and your vehicle to get a quote. The majority of quotes can be obtained online via the car insurance website. You must also select the type of coverage you require.

Choose the same coverage for each company so that you can compare them accurately. Compare all of the quotes and discounts you can find. Then you can buy your policy and start filling out all of the paperwork.