What Is a Good Comprehensive Deductible?
Last Updated on December 7, 2022
Setting a good comprehensive coverage deductible is important.
Most insurers let you choose a $100, $250, $500, or $1,000 comprehensive coverage deductible. Consider your financial situation and the likelihood of making a claim to set the right deductible for you.
What’s the best comprehensive deductible? What’s the right deductible for you? Keep reading to discover everything you need to know about comprehensive coverage deductibles.
Table of Contents:
- How Auto Insurance Works
- How Deductibles Work
- The Advantages of Raising and Lowering Your Deductible
- Can You Afford a $500 or $1,000 Payment in an Emergency?
- How Many Claims Do You Expect to Make?
- Higher Deductibles Mean a Greater Incentive to Pay Out of Pocket
- The Average Comprehensive Coverage Deductible is $100 to $500
- What to Consider When Setting Your Comprehensive Deductible
How Auto Insurance Works
To understand the importance of your comprehensive deductible, it helps to understand how auto insurance works.
Comprehensive coverage is an optional type of car insurance coverage that covers your vehicle outside of accidents. It protects your vehicle against fallen tree branches, hailstorm damage, fires, theft, and vandalism, for example.
With all auto insurance, you pay your deductible when making a claim. After you pay your deductible, your insurer covers all remaining costs of repairing or replacing your vehicle.
Comprehensive coverage is one of three main types of auto insurance coverage:
Liability Coverage: Most states require drivers to carry a certain minimum amount of liability coverage, including bodily injury and property damage liability coverage. When you injure someone or damage someone else’s car when driving, you are liable for those damages. Your car insurance liability coverage covers the cost of someone else’s medical bills or vehicle repair costs after an accident you caused.
Collision Coverage: Optional in all states, collision coverage covers your own vehicle after a loss. If you damage your vehicle in an at-fault collision, then you make a claim through collision coverage. You pay your collision coverage deductible (typically $500 to $1,000 per incident), and your insurer covers all remaining costs.
Comprehensive Coverage: Also optional in all states, comprehensive coverage covers your vehicle outside of accidents. It covers hail damage, storm damage, collisions with animals, fallen tree branches, theft, and vandalism, for example. You pay a comprehensive coverage deductible (typically $250 to $500 per incident), and your insurer covers all remaining costs of repairing your vehicle to pre-loss condition.
How Deductibles Work
When making an auto insurance claim, you need to pay your deductible.
Here’s how deductibles work:
- When you make a claim under your auto insurance policy, you must pay a deductible, which is a cash payment to your insurer
- After you pay your deductible, your insurer covers all remaining costs of repairing the damage, up to the limits of your policy
- Let’s say you caused $5,000 of damage to your vehicle when you rolled into a ditch; you have a $500 collision coverage deductible; you pay that $500 deductible to your insurance company, and your insurer covers the remaining costs of repairs; your insurer paid $4,500 to repair your vehicle, you paid $500, and the auto repair shop received $5,000
- You choose your deductible when buying car insurance; if you have a higher deductible (say, $1,000 per incident), then you’ll pay lower premiums (monthly insurance payments) than someone with a lower deductible (say, $250 per incident)
The Advantages of Raising and Lowering your Deductible
When you buy car insurance, you choose your deductible.
Some people like having a lower deductible for added peace of mind. A lower deductible means you’ll pay less if you need to make a claim.
Others like having a higher deductible. A higher deductible means you’ll pay more for each claim, but you’ll also save a small amount of money each month on premiums. Insurers may reduce premiums 5% to 10% when you raise your deductible.
Here’s what you need to know about raising and lowering your deductible:
- The higher your deductible is, the lower your premiums will be; however, a higher deductible means you’ll pay more for each claim
- If you do not anticipate making a claim, then you may want to raise your deductible to save money; you could lower premiums by 5%, for example, by raising your deductible from $500 to $1,000
- However, a single at-fault accident eliminates any deductible savings; you might save $100 per year by having a higher deductible, but a single at-fault accident within five years will eliminate all of those savings
Can You Afford a $500 or $1,000 Payment in an Emergency?
If someone asked you to pay $500 or $1,000 today, would you be able to pay?
Setting your deductible is a personal decision based on your aversion to risk and your personal financial picture.
Some people live paycheck to paycheck, for example, which would make a one-time payment of $500 or $1,000 difficult.
Others have more money, which makes it easier to handle emergency expenses.
How Many Claims Do You Expect to Make?
Regardless of how much money you have, you also need to consider the number of claims you expect to make.
Nobody expects to get into a car accident. They’re called “accidents” for a reason. It’s hard to guess how many claims you need to make, and it’s impossible to predict the future.
Consider things like:
- Your past driving behavior
- The driving habits of anyone who drives your vehicle
- Theft and vandalism rates in your area
- The value of your vehicle
After weighing all of these factors, you can decide on the right deductible for you.
Higher Deductibles Mean a Greater Incentive to Pay Out of Pocket
When you have a higher deductible, it means you have a higher incentive to pay out of pocket.
If someone scrapes your car and does $550 of damage, for example, it’s worth making a claim if you have a $250 deductible, but it’s not worth making a claim if you have a $500 or $1,000 deductible.
It’s important to remember that comprehensive coverage claims do not raise insurance premiums. A single collision claim from an at-fault accident could raise premiums by 20% to 40%, but comprehensive coverage claims should not significantly raise premiums.
The Average Comprehensive Coverage Deductible is $100 to $500
Most insurers offer comprehensive coverage deductibles at four limits:
Some insurers also offer $1,500 deductibles for comprehensive coverage. However, most comprehensive deductibles fall within the four options above.
What to Consider When Setting Your Comprehensive Deductible Amount
Setting your comprehensive deductible is a personal decision based on your financial picture and aversion to risk.
Here are some of the things to consider when setting your comprehensive coverage deductible:
Actual Cash Value of your Vehicle: The lower the cash value of your vehicle, the lower your deductible should be. At a certain point, however, you should remove comprehensive coverage from your older vehicle. If your vehicle is only worth $2,000, then even a minor accident could be considered a total loss.
Ability to Cover Emergency Payments of $500 to $1,000: If you live paycheck to paycheck, then covering an emergency payment of $500 to $1,000 may be difficult. Consider lowering your deductible to accommodate your budget.
Vanishing Deductibles and Other Perks: Some companies offer vanishing deductibles, where you pay a lower deductible for each year you’ve been with the company without making a claim. A vanishing deductible could lower $100 off your deductible each year, for example, helping you save money.
Final Word on Comprehensive Deductible Amounts
The average driver has a comprehensive coverage deductible of $100, $250, $500, or $1,000.
Setting your comprehensive deductible depends on your personal financial picture, aversion to risk, and other factors.
Some drivers are comfortable with the peace of mind of a $100 to $250 deductible, knowing their insurer will cover most damage.
Other drivers are happier with higher deductibles of $500 to $1,000 because they pay lower monthly premiums.
Consider your financial situation, vehicle value, and aversion to risk to set the perfect deductible for you.