It is better to have a higher deductible for car insurance if you want your premium to be as low as possible. Picking a higher deductible generally results in a lower premium because it puts more of the financial burden on you in the event that you need to file a claim. Still, it’s important to choose a deductible you could afford in the event of unexpected damage, because there’s no way to avoid paying your deductible if you need to file a claim. In other words, a higher deductible is only better for auto insurance if it saves you money on your premium and you can actually afford to pay it.
A deductible is the amount of money you need to pay out of pocket before your insurance company will pay for the remaining covered expenses. Deductibles generally apply to collision and comprehensive insurance, though you may need to pay a deductible for PIP or uninsured motorist coverage, too. Most insurance companies let drivers choose a deductible of $100 to $2,500 when buying a policy.
The cost of car insurance typically goes down the most between the ages of 18 and 19, when rates drop by about 25% on average. Car insurance premiums generally continue to go down each year until age 25, when rates begin to level off for the next few decades. When drivers turn 25 years old, they can expect a discount of about 14%.… read full answer
Note: The table above shows average annual rates for minimum coverage across all 50 states.
Around middle age, rates may begin to creep back up. This is because middle-aged drivers tend to insure newer, nicer cars and begin to add their children to the policy, increasing the average rate for this age range overall. Individual rates also start to go up again between the ages of 65 and 75 because senior drivers have a higher risk of accidents than middle-aged drivers.
Why Age Affects Car Insurance
Age affects car insurance rates because it’s an indicator of a driver’s risk to an insurance company. Young drivers are statistically more likely to get into a car accident than older, more experienced drivers. As a result, they’re considered high-risk and are more expensive to insure.
The risk for the insurer and the cost for the insured then generally decline as drivers age and gain experience. Once drivers pass the age of 65, however, their risk starts to go up again. Not only are senior drivers more likely to get into an accident than middle-aged drivers, but they’re also more likely to be injured as a result.
States Where Age Does Not Affect Rates
Although most people in the U.S. will find their prices change according to this timeline, there are a few states in which insurers can’t use age to determine your rate. In California, Hawaii, and Massachusetts, age won’t have a direct effect on how much you pay for car insurance. Other factors will still have an impact, though. Your driving record, credit score, and marital status can all affect your final premium.
A $1,000 deductible is better than a $500 deductible if you can afford the increased out-of-pocket cost in the event of an accident, because a higher deductible means you’ll pay lower premiums. Choosing an insurance deductible depends on the size of your emergency fund and how much you can afford for monthly premiums.… read full answer
How to Choose Between a $500 and a $1,000 Deductible
1. Figure out how much you would save on your premium with a $1,000 deductible.
The goal is to determine if those savings are worth paying an extra $500 out of pocket after an accident. 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.
Remember that the premium savings will not always be proportional to the extra out-of-pocket costs after an accident. For example, Progressive reports that doubling your deductible from $500 to $1,000 may result in only a 28% decrease in premiums on average.
2. Consider how much you could afford to pay if an accident happened today.
Accidents can happen at any moment, so if you don’t have a lot of savings or expendable income, a lower deductible is usually a safer choice to avoid financial stress after an accident.
3. Determine your car’s actual cash value.
If you have an old car that’s only worth $2,500, for example, 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.
4. Make a decision based on your financial situation and preferences.
After evaluating your income, monthly expenses, savings, available credit and car value, it should be clear which is a better deal for you: saving monthly on premiums or saving in the event of an accident.
Although $500 and $1,000 are the most common deductibles, you may want to consider other deductible amounts, too. Some companies offer lower and higher options, such as $100, $250 or $2,500 deductibles.
No matter what you decide, be sure to set aside enough cash to cover your deductible before you need to make a claim. To learn more, check out WalletHub’s guide to car insurance deductibles.
A good deductible for auto insurance is an amount you can afford after an accident or unexpected event, although most drivers pick an average deductible of $500. Other common auto insurance deductibles are $250 and $1,000, but drivers should take several factors into account before deciding which one is right for them. These include what premium they can afford and how likely they are to file a claim. … read full answer
Since policies with a lower deductible cost more, it can be tempting to choose a high deductible. But your deductible shouldn’t be more than you can comfortably afford to pay out of pocket if your car is damaged. If your deductible is too high, you could be putting yourself in a difficult financial position down the road.
You can choose different deductibles for separate types of coverage, so you should consider how likely you are to file each type of claim. For example, if you live an in an area that is prone to natural disasters, consider getting a comprehensive insurance policy with a low deductible. Similarly, if you’ve never had an accident and you live in a low-traffic area, consider choosing a high-deductible for your collision insurance policy.
Every driver’s financial situation is different, so there is no such thing as a one-size-fits-all deductible. To learn more, check out WalletHub’s guide to car insurance deductibles.
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