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To get a low deductible, you'll face a pricey premium. Luckily, there are other ways to save.
The average six-month premium for car insurance with a $500 deductible is a little over $900, or about $150 per month. $500 is considered a standard car insurance deductible.
We'll explore what deductibles are, how they impact your premium and your insurance policy, and which insurance companies offer the cheapest car insurance with a deductible of $500. Let’s get started.
Simply put, a deductible is what you pay after a collision that leads to an insurance claim — the remainder is covered by your insurance company. Example: you’re in a crash in which you hit a pole and cause $1,300 worth of damage to your vehicle. You have a $500 deductible. In this scenario, you would only pay $500 of the $1,300, with the remaining $800 being paid by your insurance company.
It’s important to consider that a deductible is only used for certain coverages. For instance, there are no deductibles for liability coverage. The liability portion of auto insurance, which consists of bodily injury protection (physical injury you cause in an accident) and property damage (damage to property you cause in an accident) are not held to a deductible limitation. Deductibles typically apply to your vehicle through three 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; it refers to colliding with another fixed object, such as a vehicle, guardrail, or a wall. Liability — also known as fault — is irrelevant here, so the costs of repairs will be covered after you pay your deductible. In the event of a collision claim, you would pay what’s called your collision deductible.
Comprehensive coverage protects your vehicle against things other than collision. So this includes things like 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. If you’re in a not-at-fault accident and the other driver either does not have a car insurance policy or does not have enough insurance, this will cover the damages minus your deductible. Often times, your insurance company will compensate you for your UMPD deductible via the other driver.
While your deductible is what you pay in the event of a collision, comprehensive, or UMPD insurance claim, your premium is what you pay every month — or every 6-12 months, depending on your billing cycle.
Basically, your deductible and your premium are inversely related; if you raise one, you lower the other. Let’s look at an example where you raise your deductible from $250 to $500. This would lower your premium because you are taking a greater amount of financial responsibility for the potential repairs your insurance company would otherwise have to pay. If you were to cause $2,000 in damages to your vehicle, your insurance company would only have to pay $1,500 versus $1,750. So, they will reward you for their decreased financial responsibility by lowering your premium.
Between the range of deductibles available — which can sometimes be specifically set by your insurance company — $500 is pretty average. So, in order to see which car insurance company offers the cheapest rates with this deductible, we surveyed some top insurance companies where the driver (profile outlined here) had a $500 deductible. Here are the results.
USAA is the cheapest insurance company — with Liberty Mutual coming in second — if you have a $500 deductible with our user profile. However, this is only reflective of our standard user profile, which is probably pretty different from yours. Use our model as a starting point in your search for car insurance.
While a $500 deductible is common, you do have some flexibility. If we revisit the user profile we created with a $500 deductible and increase the deductible to $1,000, we can see how our auto insurance rates shift.
|Car Insurance Provider||$500 Deductible||$1000 Deductible|
On average, you save about $78 per six-month insurance policy period if you chose a $1,000 deductible versus a $500 deductible. But there’s another reason to consider a higher deductible that can end up saving you thousands. By increasing your deductible, you also discourage yourself from using it and filing what would be considered an at-fault claim. Let us explain further.
When you file a claim under your collision coverage (and sometimes for a UMPD insurance claim), your insurance company will raise your rates for what they see as an at-fault accident. An insurance company views collision claims to be at-fault accidents because they see you, the driver, as in control of the vehicle when the accident occurred. Thus, you’re responsible.
The average insurance company in the U.S. will increase your rates by nearly 50% after your first at-fault accident. Moreover, this rate increase will stay on your insurance record for three years — meaning that that percentage increase will persist all three years. Below, you can see some average estimates for a collision claim across the U.S. over three years.
|Time After Accident||Average Premium Increase|
|Increase at 6 months||+$308.50|
|Increase at 12 months||+$617|
|Increase at 3 Years||+$1,851|
As you can see, filing an at-fault claim where the damages are greater than $2,000 will raise your premium an average of $617 a year or $1,851 for the full three 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.
Although you can expect a hefty increase from filing a collision claim, your comprehensive deductible is a little different. Your insurance company will generally consider comprehensive claims to be not-at-fault because they tend to happen outside the control of the driver. Thus, the monetary impact of a comprehensive claim is almost zero.
Despite the evidence that a $500 deductible may not be the way to go, it's still a pretty standard deductible. Plus, there are times when your deductible will be chosen for you. If you have a loan or lease on your vehicle, you might be required to maintain at least a $500 deductible. When you enter these types of agreements, you do not own the vehicle and thus are required to maintain the physical integrity of it. Your loan and lease company might fear if you have a deductible greater than $500, you will be unable to pay it. Thus, $500 is usually the maximum amount they will allow.
If you’re looking for more information on deductibles or car insurance, see our additional articles here.