High deductible, low premium; discover what's best for you
While many Americans recognize the concept of insurance deductible, very little probably understand how impactful a deductible can be to your policy. That is especially true for $1,000 deductibles. What your deductible is, where it applies, and which insurance company offers the cheapest premium with a $1,000 are all concepts we will discuss. Let’s get started.
Simply put, a deductible is what you pay after an accident and filing an auto insurance claim, while the remainder is covered by your insurance company. For example, you’re in an accident where you strike a guardrail and cause $5,000 worth of damage to your vehicle. After you pay your $1,000 collision deductible, the remaining $4,000 in repair costs would be covered by your insurance company.
You should note that a deductible is only applicable to certain coverage options. For example, there are no deductibles for your liability coverage. The liability part of your auto insurance, which consists of your bodily injury protection (physical injury you cause to a person and people in an accident) and property damage (damage to property you cause in an accident) are not held to deductible limitations.
For your liability coverage, your insurance company will pay out the damage without you paying to pay anything first. Deductibles typically applies to your vehicle through 3 coverage options; comprehensive, collision, and uninsured motorist property damage. Let’s break down those coverages.
Your collision coverage is what you typically think of when you’re thinking about a car accident insurance: it refers to colliding with another fixed object, such as a guardrail, a car, or wall. Because of the nature of this coverage, liability is irrelevant. The cost of repairing your vehicle is covered as long as you pay your deductible. Collision deductible refers to what you pay after having a collision claim.
Comprehensive coverage through your comprehensive deductible covers things over than collision. The phrase, “other than collision” sounds nondescript but that’s actually another name for this coverage and a name used in Virginia. OTC (or comprehensive coverage) provides coverage from damage that results from theft, vandalism, animal and weather-related accidents. Just like your collision deductible, liability isn’t factored into a comprehensive claim. The costs of repairs will be covered minus your comprehensive deductible regardless of fault.
Uninsured property damage coverage, or UMPD, works very similarly to collision coverage. It provides physical coverage to your vehicle if you’re in a not-at-fault accident in which the other driver either does not have insurance or limits on his liability coverage are not sufficient enough to cover the full extent of your damages. This coverage will come with a deductible which your insurance company can compensate you for via the other driver.
The big question in the insurance world is simple: what insurance company insurance company offers the cheapest price for the coverage I want? Well, in order to answer that, we decided to create a standard user profile (outlined here) and survey some top companies across the US. Here are the results:
6 month premium with a $1,000 deductible
As you can see, Nationwide is the cheapest insurer for our profile with a 6-month premium at $567 with Farmers a close second. Consider, however, at this data is a reflection of the entire US and our user profile. There are many rating factors that go into your car insurance premium that are unique to you. The only way to discover who has the cheapest car insurance for you is to follow our lead and compare as many insurance companies as possible. Do that here with us.
As we’ve just described, your deductible is what you pay for a collision, comprehensive, or UMPD insurance claim. Your premium is the total insurance bill that you pay, depending on your insurance policy, every month.
You might not realize that changing your deductible does affect your premium. Your premium and your deductible are inversely related: by raising one, you lower the other.
Let’s return to the first example of colliding with a guardrail and causing $5,000 of damage to your vehicle. If you were to raise your deductible from $500 to $1,000, the amount of money your insurance company must pay out drops from $4,500 to $4,000. Because you’re taking a greater chunk of financial responsibility for the payout from your insurance company, you are rewarded with a lower premium.
Using the same insurance companies as we previously discussed, let's see how our premiums change when we look at $500 and $1,000 deductibles.
6 month premiums with a $500 v. $1000 deductible
|Age||$500 Deductible||$1000 Deductible|
As you can see, by raising your deductible from $500 to $1000, you lower your premium by $80 on a 6-month policy (on average). However, there’s another reason why raising your premium is a good moving saving tip, which we will explore next.
The standard deductibles most people have are $500 or $1,000. If you’re unsure of which one is right for you, consider our these questions.
If you’re leasing or have a loan for your vehicle, you might be required to carry a certain deductible. Typically, they will require a $500 or lower comprehensive and collision deductible. The reason for this is they’re simply trying to protect their asset – your vehicle. If you have a higher deductible, they fear you will not be able to pay it.
If you’re deciding between a $500 deductible versus a $1,000, you should consider if there is anyone on your policy that might be more inclined to file a claim. Again, this could refer to someone who has a leased vehicle. Because you do not own the vehicle you are leasing, you are required to return the vehicle in near-perfect condition. This could also refer to young drivers, such as a teen, who has less driving experience. If you’re worried about your teen damaging your vehicle often, as teens do, a lower deductible might help.
Lots of insurance experts recommend having a higher deductible because it discourages you from filing a claim. Collision claims after often seen by insurance companies as at-fault accidents which can increase your premium by an average of 43% per year. Moreover, most insurance companies will keep that at-fault on your insurance premium (and thus charge you for it) for 3 years.
Increase after an at-fault accident
|No accidents||Increase at 6 months||Increase at 12 months||Increase at 3 Years|
As you can see, filing an at-fault where the damages are greater than $2,000 will raise your premium an average of $611 a year or $1,833 for the full 3 years. Because of this, most insurance experts recommend only filing an insurance claim if you suffer a catastrophic loss where the value of the premium increase plus your deductible is less than the cost of repairs. For example, if you total your vehicle.
Your insurance company sees these types of claims as at-fault accidents because they see you, the driver, as in control of the vehicle when the accident happened. So, in their eyes, you’re responsible.
For a UMPD claim, which is not at-fault by definition, your insurance company may still raise your rates because they had to take financial responsibility for the claim. If your insurance company is rating you for a UMPD claim as an at-fault accident, you should consider that as a sign to shop for car insurance elsewhere.
We should note that comprehensive claims are not generally considered to be the same as collision or UMPD claims. Because of the nature of comprehensive coverage, insurance companies see them as outside of the control of a driver. While a collision claim will raise your rates, our data shows that comprehensive claims tend to only affect you a couple of percentage points.
If you’re looking for more information on deductibles or other information on car insurance, see our additional articles here.
Between September and December 2017, The Zebra conducted comprehensive auto insurance pricing analysis using its proprietary quote engine, comprising data from insurance rating platforms and public rate filings. The Zebra examined nearly 53 million rates to explore trends for specific auto insurance rating factors across all United States zip codes, averaged by state, including Washington, DC.
Analysis used a consistent base profile for the insured driver: a 30-year-old single male driving a 2013 Honda Accord EX with a good driving history and coverage limits of $50,000 bodily injury liability per person/$100,000 bodily injury liability per accident/$50,000 property damage liability per accident with a $500 deductible for comprehensive and collision. For coverage level data, optional coverage (that must be rejected in writing) is included where applicable, including uninsured motorist coverage and personal injury protection.
National property and casualty losses information is from the Insurance Information Institute and the NOAA National Centers for Environmental Information U.S. Billion-Dollar Weather and Climate Disasters report.
For vehicle make and model data, analysis referenced the most popular vehicles in the U.S. by 2016 year-end sales according to Goodcarbadcar.net’s automakers’ data.
Finally, some rate data may vary slightly throughout report based on rounding.
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