How to Choose Your Car Insurance Deductible in 2025

For example, if you have a $3,000 repair and a $1,000 auto insurance deductible, you would be responsible for paying $1,000. After paying the deductible, the insurance company would pay the remaining $2,000. However, you will pay the entire bill if the repair costs less than the deductible.

Not all types of insurance coverage have a deductible attached. Generally, deductibles apply to collision, comprehensive, uninsured/underinsured motorist, and personal injury protection.

RELATED: How Much Car Insurance Do I Need?

How does a deductible work?

You can choose your deductible when you purchase your policy. Policies with lower deductibles have higher premiums but lower out-of-pocket costs if you make a claim. And policies with higher deductibles have lower insurance rates but higher out-of-pocket costs if you file a claim.

You pay the deductible when you file a claim with the insurance company. The carrier covers costs that exceed the deductible amount.

When is the car insurance deductible paid?

Deductibles apply to some types of auto insurance coverage, but not others. Collision, uninsured motorist comprehensive property damage, and personal injury protection generally have a deductible attached. You will pay a deductible each time you file a claim under these coverage areas.

You can skip filing a claim to avoid the deductible, but you will have to pay the entire repair bill.

What if you are not to blame?

When another motorist is at fault for the accident, that driver's insurance company is responsible for covering the cost of repairing your vehicle and you will not need to pay a deductible to repair your car.

Average cost of car insurance deductible

The average car insurance deductible is $500. However, car insurance deductibles can range from a few hundred dollars to $2,500. No matter what amount you choose, such as $250, $1000, $1500, etc., make sure you can pay it if you need to file a claim.

6 steps to choose a deductible

When selecting an auto insurance deductible, follow these six steps to determine the best amount for you and your wallet.

1. Choose a high or low deductible

There is a fairly simple relationship between your insurance deductible and the rate you pay for your policy. Plans with lower deductibles typically have higher monthly premiums and vice versa. But if you choose a plan with a higher deductible to get a lower insurance rate, you'll pay more out of pocket if you file a claim.

2. Calculate the cost difference

In the hypothetical scenario below, the driver would save $1,116 per year if they had a high-deductible policy and did not file any claims. But if the driver filed two claims that year, a low-deductible plan would save $384 in out-of-pocket costs.

3. Are you likely to file a claim?

In general, drivers who are more likely to file an auto insurance claim will have lower total costs with a low-deductible auto insurance plan. In contrast, drivers who do not file a claim will generally save with a higher deductible plan. However, when you opt for a plan with a higher deductible, you are betting that you will not have an accident.

When considering the likelihood of filing a claim, ask yourself if you have a history of car accidents or engage in high-risk driving behaviors, such as speeding or rush hour driving.

MORE: Does insurance cover rodent damage?

4. Determine the value of your car

Depending on where you live, most insurance companies will only pay up to the actual cash value of your vehicle if the insurer declares it a total loss. Therefore, it is generally better to have a lower deductible if your car is not worth much.

For example, let's say your vehicle is worth $3,500 and you have a $1,500 deductible on your insurance policy. If your car is totaled, the insurer will only pay $2,000 after you meet the deductible.

On the other hand, if your car was worth $10,000 before the accident and you have a $1,000 deductible, the insurance company will pay $9,000 if the car is totaled. Therefore, having a higher deductible makes more sense.

You will need to calculate how much your car is worth. Then, compare its value to the costs of your insurance policy. And remember, you don't have to choose the same deductible for every type of coverage you have. An insurance agent can help you match deductible amounts based on the value of your car and the risks you face.

5. Evaluate Your cash savings

If you are in a car accident, you will have to pay your deductible before the insurance company will begin contributing to repairs.

If you don't have savings or an emergency fund to cover a high deductible, it may be better to choose a low-deductible policy. Higher monthly bills for insurance premiums may be a better way to protect your finances if you are in an accident.

6. What is your risk tolerance?

Choosing a high-deductible plan is a bet that you won't get into a car accident. If you have an accident with a high-deductible policy, you are still covered. But you will pay more out of pocket after the accident than if you had a low-deductible policy.

A high deductible policy is good for those who:

• Less likely to be in a car accident or file a claim
• With an emergency fund to cover a large repair bill if necessary
• Need to cover a more expensive car
• More comfortable with risk

A low deductible policy is best for those:

• More likely to file a car insurance claim
• Own a car of lower value
• No savings to cover a large unexpected bill
• Risk aversion

You can change the deductible on your auto insurance policy at any time by contacting your insurance company. In most cases, the adjustment will take effect in your next policy period. Reducing the deductible will increase your premium, and increasing the deductible will reduce the amount you pay for the policy.

Editor's note: This article has been updated since its initial publication.