High deductible, low premiums: How to set your car insurance deductible

Where you set your car insurance deductibles will affect how much you’ll pay for car insurance. The higher you set your deductible, the lower your premiums will be, and vice versa.

Anna SwartzStephanie Nieves author photo


Anna Swartz

Anna Swartz

Managing Editor & Auto Insurance Expert

Anna Swartz is a managing editor and auto insurance expert at Policygenius, where she oversees our car insurance coverage. Previously, she was a senior staff writer at Mic.com, as well as an associate writer at The Dodo.

 & Stephanie Nieves

Stephanie Nieves

Editor & Home and Auto Insurance Expert

Stephanie Nieves is a former editor and insurance expert at Policygenius, where she covered home and auto insurance. Her work has also appeared in Business Insider, Money, HerMoney, PayScale, and The Muse.

Updated October 27, 2021 | 4 min read

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Purchasing car insurance is a pretty simple process, but it can involve a lot of different steps: You need to figure out what coverage you need, compare quotes at multiple companies, and, of course, choose your deductible amounts.

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Your deductible is the amount that you pay out of pocket before the insurance company reimburses you for a covered loss. Not every type of car insurance coverage requires a deductible, but for those that do, you’ll typically choose a dollar amount, often $500 or $1,000.

The higher your deductible, the lower your rates will be, and vice versa. But choosing a deductible amount can be tricky, you don’t want to set them higher than you could reasonably pay in the event of a loss. Read on for tips on setting your insurance deductible.

Key Takeaways

  • When choosing certain car insurance coverage, you’ll be required to set a deductible amount for that coverage

  • The deductible is the amount you’ll have to pay out of pocket for that coverage to kick in and cover the rest

  • You want to set your deductible at an amount that you’ll actually be able to pay in the event of a loss

What is a car insurance deductible?

When you purchase car insurance, you’re actually buying several types of coverage that make up your policy. For some types of coverage, like liability coverage and uninsured/underinsured motorist coverage, you choose coverage limits, which is the maximum amount your car insurance company pays out for a covered loss. The higher you set your coverage limits, the more you’ll pay for car insurance.

For other types of coverage, like comprehensive coverage and collision coverage, you’ll choose a deductible amount. That’s the amount that you’ll have to pay out of pocket before your car insurance will cover the rest.

Many drivers set their deductible at $500 or $1,000. A sample car insurance policy, listing coverages and their limits and deductibles, could look like this:

Basic CoveragesPolicy Limits
Bodily injury liability$50,000 each person, $100,000 each accident
Property damage liability$50,000 each accident
Medical expenses (personal injury protection)$5,000 each person
Uninsured/underinsured motorist$50,000 each person, $100,000 each accident
Comprehensive$500 deductible
Collision$500 deductible

How does a deductible work?

Let’s say you’re driving and you accidentally hit a deer in the road. The deer walks away fine, but the front of your car is seriously damaged. If you have comprehensive coverage as part of your policy, the damage will be covered (comprehensive coverage includes damage caused by animals).

Let’s say the repairs cost $3,500. Your insurance will cover that cost, but minus your deductible amount. If you set your deductible at $500, that’s how much you’ll have to pay out of pocket before your insurance pays you the remaining $3,000 for the loss.

Sometimes, if the cost to repair damage to your car is close to your deductible amount, it’s not worth filing a claim at all. You’ll have to foot most of the bill yourself, and filing a claim could lead to a rate increase.

Why do lower insurance premiums go with higher deductibles?

The higher you set your deductible, the lower your premiums will be. That’s because you’re agreeing to take on more of the cost of damage to your car. Conversely, the lower you set your deductible, the more you’ll pay for car insurance, because you’ll be paying less out of pocket.

But your insurance premium is calculated based on a number of factors, not just your coverage limits and deductible. Your age, address, driving history, credit score, and make and model of car all help determine how much you’ll pay for car insurance.

So if you’re thinking of setting your deductible extra high just to help lower your costs, you might want to reconsider. If you actually wind up filing a claim, you’ll be stuck paying that deductible out of pocket — and there are better ways to lower your car insurance costs, like shopping around for new coverage and making sure you’re getting every available discount.

→ Learn more about how car insurance rates are calculated

What is a good deductible for car insurance?

As we mentioned above, many drivers set their comp and collision deductibles at $500 or $1,000. But you don’t have to make them the same — you might want to set your collision deductible higher than your comprehensive deductible if you’re more concerned about damage from a car accident than from extreme weather, vandalism, or theft.

Wherever you set your deductible, remember that you may actually have to pay it. Don’t set your deductible higher than you can afford to pay in the event of an accident — that could leave you stuck with a bill you can’t pay.

If you have a car lease or loan, you may actually be required to set your deductible below a certain amount. That’s because your lessor or lienholder wants to make sure you keep the car in good condition, and if you set your deductible too high, you may not be able to pay it and get your car repaired. Check the fine print on your lease or loan agreement to make sure you’re considering all the insurance you’re required to have.

→ Learn more about how to set your car insurance deductible

Frequently Asked Questions

What happens if you don't meet your deductible?

If the cost of repairs is less than your deductible, you shouldn’t file a claim. Filing a claim can raise your rates, even for an accident you didn’t cause, so you should only file a claim if the cost to repair your car is significantly more than your deductible.

Can you waive your car insurance deductible?

Some car insurance companies have what’s called a “vanishing deductible” perk, which usually means that for every year you’ve been with your insurance company without filing a claim, your deductible amount will drop by a certain amount. With some carriers, your deductible might also be waived if someone causes an accident and you file a claim with your own coverage instead of using the at-fault party’s insurance. But, in general, your deductible probably won’t be waived, so you should set it to an amount you can actually pay out of pocket.

How does a person’s driving record affect the choice of deductible?

If you have a clean driving record, you may want to set your deductibles higher since the chances of you actually paying that deductible are slimmer. But say you live in a densely populated area and the chances of your car being stolen or damaged are higher, then you might want to opt for a lower deductible that you can readily pay.