How to lower your car insurance deductible

To get a lower car insurance deductible, you will have to raise your monthly car insurance rates. You will pay less for accident repairs with a lower car insurance deductible. When someone else is responsible for a car accident, it is their insurance that covers the cost of repairing your vehicle. What this means for you is that you will have no out-of-pocket expenses to cover that accident.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP® Joel Ohman

UPDATED: May 4, 2022

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Here's what you need to know...

  • All you need to do is contact your insurance company and tell them you want to reduce your deductible.
  • Make sure you weigh the benefits with the consequences of lowering your deductible.
  • You will pay a little more each month if you reduce your deductible.
  • You will have less out of pocket if you cause an accident and you have a lower deductible.

To reduce your car insurance deductible, all you have to do is contact your car insurance company and tell them the reduction you would like to make. You can do this over the phone, online, or via e-mail.

The deductible amount is completely up to you as the customer, and you have the right to change your deductible amount at any time as long as you inform the insurance company.

However, it is important to keep in mind that reducing your car insurance deductible will have some consequences.

Read on to learn all about auto insurance deductibles and then, of course, you want to save some money on your car insurance, right?

To see how much you might be able to save just enter your ZIP code above for a FREE car insurance comparison!

How do deductibles work with car insurance?

The basics of car insurance center around deductibles. A deductible is what you, the customer, pay before your insurance kicks in. When you are in an accident or when your car is damaged, you must file a claim for the replacement or repair costs.

The insurance company will typically pay out the claim less the deductible amount. You would then be responsible for the remainder.

This is part of the terms of the contract you make with the insurance company when you get a car insurance policy.

It is up to you to name the deductible amount when purchasing a car insurance policy.

Deductibles typically start at $250 and can go up to $5,000 or even more. The insurance company will give you a suggestion on the deductible based on your income, the type of vehicle you are insuring, and the replacement value of that vehicle.

However, it will only be a suggestion. The final amount is entirely up to you, what you think you need, and what you can afford.

Some insurance companies use a simple calculation suggesting that your deductible should be 10% of the value of the car. This means, for example, if your vehicle is worth $5,000, a $500 deductible would be a good amount.

If your vehicle is worth $25,000, then a $2,500 deductible would be a good amount. Again, it is only a suggestion.

The amount you choose should be based more on what you can afford than the value of your vehicle.

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How a Car Insurance Deductible Works

A deductible works like this: If you get into an accident that causes $3000 worth of damage to your car and your deductible is $500, you pay $500, then the insurance company will pay the remaining $2500.

Changing your deductible can affect the amount of your premium, anywhere from 10% to 20%. You can change your deductible amount at any time, so starting with a low deductible until you save up money and then changing the amount is possible.

You will need to choose a deductible, whether you have comprehensive coverage or simply collision. Comprehensive coverage covers any damage caused to you by various non-collision incidents:

  • A natural disaster
  • Vandalism
  • Theft

Comprehensive coverage is important if your car is new or if you still owe money on your vehicle. Collision coverage covers only collisions.

Whether you get comprehensive coverage or collision coverage, your deductible should still be based on:

  • Your income level
  • The value of your car
  • How much you want to pay for your monthly premium

Many websites have deductible calculators that ask you questions. Your answers help determine the amount that is recommended for your deductible. Using a deductible calculator is one way to make sure you are covered should you have an accident.

What is the purpose of an auto insurance deductible?

A car insurance deductible serves many purposes.

  • First, it keeps overall insurance rates affordable. Since the customer pays a portion of the claim, insurance companies can keep prices affordable by making deductibles mandatory.
  • Second, deductibles cause drivers to be more cautious. Knowing that you will have to pay for the first part of damage should make you more careful and diligent in driving.
  • Last, deductibles discourage individuals from claiming everything, even very small claims. For example, if $300 damage is done to your vehicle and your deductible is $500, there is no claim to file with the insurance company.

By not filing many small claims, insurance companies can use their money to pay for more substantial claims, which are a win-win for both the insurance company and the customer.

Every car insurance company has different premiums, and these premiums are affected by deductibles. If you aren’t sure what car insurance company or deductible is right for you, you can compare companies and prices online.

Comparing online saves you time and gives you all the information you need to make your car insurance choice.

What are some consequences of reducing your car insurance deductible?

Though you are able to reduce the amount of your deductible at any time simply by contacting your insurance company, doing so will have some consequences.

First, you should be aware that the higher your deductible, the lower your monthly premium will be. This is because you are taking on more of the risk and putting less risk on the insurance company.

The more the insurance company will have to pay when a claim is filed, the more they will charge you each month.

When you contact your insurance company to let them know you will be reducing your deductible, they will do some quick calculations and let you know what your new monthly premium will be, and it will be effective immediately.

You will need to adjust your payment plan and budget to fit this new monthly premium amount. Remember, if you don’t make your payments in full and on time, you won’t be covered if you are in an accident or damage is done to your vehicle.

One of the positive consequences of reducing your car insurance deductible is that you will owe less money when an accident or damage occurs.

The best thing to do concerning your deductible is to set aside the amount of the deductible in a savings account or by some other means so that if it comes due, you will have the money to pay the insurance company.

Reducing your deductible means you will owe less in one lump sum but a little more each month.

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Can I increase my deductible if I change my mind later?

Yes, you can change your policy at any time. However, you should keep in mind that the insurance company has the right to renew your policy from the date that you made your changes, rather than waiting until your policy expires.

If you have had an accident and this occurs, your rates will increase immediately rather than at the end of your current policy term. You could end up paying sooner than you would if you just chose to wait.

Before reducing your comprehensive deductible, you should take into consideration how much your monthly premium will increase. Take this number as well as your new deductible amount and see if the increase is worth it. In many cases, it won’t be.

Because comprehensive claims tend to be less expensive than collisions, most insurance agents recommend a lower comprehensive deductible and a higher collision deductible.

It may be better to take the amount your premium would have increased had you changed the deductible and put that away towards paying the deductible in the future.

Does my deductible apply if someone else causes a car accident?

When someone else is responsible for a car accident, it is their insurance that covers the cost of repairing your vehicle. What this means for you is that you will have no out-of-pocket expenses to cover that accident.

The other driver won’t be paying a deductible for your repairs or medical care either. The deductible is reserved for covering collision or comprehensive insurance claims, not liability claims.

The same thing applies to you. If you cause an accident, you won’t have to pay anything for the liability aspect to be covered.

If your vehicle is damaged, you can choose to forgo having the insurance company cover that damage and pay for it yourself, thus reducing the amount of money the insurance company has to pay.

The benefit to you is two-fold. The less the insurance company pays for a claim, the lower the increase of your premiums. In addition, if the damage is less than $500, you can avoid making a claim that actually puts an additional black mark on your driving record. Remember, a higher deductible means a reduced cost in your insurance premium.

Choosing the Right Car Insurance Deductible

Choosing an insurance company, coverage, and deductible amounts can seem overwhelming, especially with so many companies to choose from.

To reduce some information available, you can use an online car insurance comparison rate quote tool to narrow your choices down to a few top companies.

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The Bottom Line

Understanding the average car insurance deductible and considerations when choosing a deductible amount can help you make a smart choice when you purchase your policy from your auto insurance provider.

Auto insurance rates are based on a comprehensive analysis of car insurance quote pricing data, evaluating more than 83 million insurance rates from across the United States.

A comparison tool will show you rates and quotes from different companies side by side so you can find the company and deductible amount that is right for you.

Take a few seconds and input your ZIP code into the FREE tool at the bottom of the page to get started now!

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