What is a collision insurance deductible?

Choosing between a $500 and $1,000 auto insurance deductible depends on how much you can afford right now and how much you expect to save for emergencies moving forward. A lower car insurance deductible means you’ll pay less out of pocket in the event of an accident but pay more upfront in premiums. A higher deductible means you’ll pay less upfront in premiums but more in the event of an accident.… read full answer

Drivers nationwide save an average of 8% - 10% on car insurance premiums by increasing their deductible from $500 to $1,000, according to a survey commissioned by InsuraQuotes. But where you live plays a big role in how much you could potentially save by choosing a higher deductible. Drivers in Michigan can save an average of just 4% on premiums by increasing their deductible from $500 to $1,000, while drivers in Massachusetts can save as much as 19%.

Car insurance companies typically use a $500 deductible to give quotes, which means you’ll need to make a point of checking how things change with a $1,000 deductible. In doing so, remember that premium savings from a higher deductible will not always be proportional to the extra out-of-pocket costs after an accident.

As a result, you’ll need to figure out how much you would save on your premium with the $1,000 deductible and whether those savings are worth an extra $500 out of pocket if you have an accident. If not, you might be better off paying a higher premium in return for lower financial risk on the back end. That’s especially true if your vehicle is worth a relatively low amount. For example, if you have an old car that’s only worth $2,500, you don’t want to carry a deductible of $1,000. It’s too close to the total value of your vehicle, which means the replacement cost wouldn’t put much more stress on your finances than the deductible itself.

When choosing between auto insurance deductibles of $500 & $1,000, consider your:

• Car’s value
• Income
• Monthly expenses
• Savings/reserve funds
• Available revolving credit

It might be worth comparing your premium quote with other deductibles, too. Some companies offer lower and higher options in addition to the more popular $500 and $1,000 deductibles. You’ll commonly see $100, $250, or $2,500 deductibles available on car insurance policies.

Although higher deductibles can keep premiums low, it’s important to think about what you can afford if something happens. You won’t be happy if you can’t get your car fixed because you picked a $2,500 deductible and don’t have enough money to pay it. So, make sure to factor in how much you’ll realistically be able to pay out of pocket without much stress.

No matter what you decide, be sure to set aside enough cash to cover your deductible before you need to make a claim.

No, you do not have to pay a car insurance deductible when not at fault unless you file a claim with your own insurance. Usually, the at-fault driver's liability insurance will cover your expenses after an accident, but you may want to use your own coverage if fault is undetermined or the at-fault driver is uninsured.… read full answer

It can sometimes take the insurance adjuster a long time to determine fault, which can affect when you receive compensation from the at-fault driver. In that case, you can file a claim with your collision insurance, personal injury protection, or MedPay coverage in order to pay for the cost of repairs or medical bills in the short term.

You will have to pay a deductible for collision coverage and personal injury protection, but your insurance company will eventually recoup your costs through subrogation with the at-fault driver’s insurer. However, if you are partially at-fault, then your expenses may be reimbursed in proportion to your fault or not reimbursed at all, depending on your state.

If the other driver is uninsured or doesn’t have enough coverage to pay for your expenses, you can file a claim with your uninsured/underinsured motorist insurance, if you have it. Uninsured/underinsured bodily injury coverage pays for your medical expenses and does not require a deductible. If your car is damaged, your uninsured/underinsured motorist property damage coverage will pay for repairs, and in some states you will have to pay a deductible.

To learn more, check out WalletHub’s guide to car insurance deductibles.