Car Sense

How to Choose a Deductible

There are many choices you need to make when it comes to choosing the right auto insurance. When it comes to customizing your policy, one of the biggest decisions is what deductible amount you will choose.

WHAT IS A DEDUCTIBLE IN AUTO INSURANCE?

Your deductible is the amount of money you will have to pay toward fixing or repairing your car before your insurance kicks in. Deductibles typically only apply to collision and comprehensive coverage. (There may be other cases where you could have a deductible – for example, uninsured motorist property damage – so ask your agent about all coverages with deductibles.)

Here’s an example scenario: Let’s say you’re involved in an accident and the repair estimate from the auto repair shop is $2,000. If you have a $500 deductible, you will be responsible for paying $500 and then your insurance will take care of the remaining $1,500.

Most people choose a deductible between $100 and $1,000, although they could possibly be as low as $0 or as high as $10,000, depending on the coverage and applicable state laws. Your agent can help  explain your options so you can pick an amount that’s comfortable for you.

DOES ERIE INSURANCE OFFER A DIMINISHING DEDUCTIBLE?

Yep, we have that! Read more about how the Erie Auto Plus* endorsement can help with a diminishing deductible (and a lot more) for about $30 more per year.

DO I ALWAYS HAVE TO PAY MY DEDUCTIBLE AFTER AN ACCIDENT?

If you’re deemed at fault for an accident, you typically pay the deductible under your own policy. If another person damages your vehicle and they are deemed at fault, their insurance would typically pay for your damage in its entirety. In that case, you wouldn’t be responsible for paying the deductible under your own policy.

HOW DOES YOUR DEDUCTIBLE AFFECT YOUR PREMIUM?

Generally, the higher your deductible, the lower your insurance premium (which is just a fancy word for price). The lower your deductible, the more you will typically pay for your insurance premium.

Related: What Determines the Price of My Auto Insurance?

Not sure what to pick? No worries – your ERIE agent is here to help.

Your agent can offer you multiple quotes with different deductibles. They can also explain how changing your deductible can affect your annual premium – or show you the cost savings between different options over multiple years. Ultimately, they want you to fully understand your options and feel confident about your decision.

Let’s take a look at the basics.

HOW TO CHOOSE YOUR DEDUCTIBLE

It’s all about your budget – and your comfort level with risk. Here are some things to consider about deductibles when you talk with your agent:

  1. Your budget: Ask yourself: What’s the amount of money I would be comfortable paying if I need to repair my vehicle? The lower your deductible, the less you will have to pay out of pocket if you have to file a claim, but your overall car insurance premium will be higher.

    It works the opposite way, as well.  If you have a high deductible, you will have a lower car insurance premium – but you’ll pay more out of pocket if you file a claim. This decision comes down to personal preference and what you can afford within your current budget.
     

  2. Drive time: Think about the amount of time you spend driving on a daily or weekly basis. If you’re in your car a lot – or driving in more accident-prone areas – you might be exposed to more risk than someone who drives less.
     
  3. Value of your vehicle: The more expensive the vehicle, the more it costs to insure. In that scenario, a high deductible could help you save on your premium. However, if you have a car loan, some lenders stipulate that your deductible should not exceed a certain amount. Check with your lender to be sure.

See also: Find Out the One Insurance Add-On Every New Car Needs

One final tip: Whatever deductible you choose, it’s smart to have that amount of cash on hand in your emergency fund. That way you’re financially prepared if you end up having to file a claim.

YOUR ERIE AGENT CAN HELP YOU SELECT THE RIGHT COVERAGE

ERIE agents know life is not one size fits all. With just-right coverage, flexible options and available discounts, your agent is there to help you get auto insurance that suits your life and your budget.

Not sure what your current deductible is? If you’re an ERIE customer, you can ask your agent or log in to your online account to view your policy details.

Contact an ERIE agent today to discuss your deductible options, understand how different deductibles affect your premium, and get an auto quote.

WANT TO LEARN MORE ABOUT AUTO INSURANCE?

From deductibles to discounts, we’ve got you covered with more info on the basics. Check out these related blog stories on understanding your auto insurance coverage:

* Diminishing deductible up to a maximum reduction of $500. In New York, comprehensive deductible cannot be reduced to less than $50 and collision deductible cannot be reduced to less than $100.

This story was originally published in 2014. It was updated with new information in 2019.

It’s all about your budget – and your comfort level with risk. Here’s how to make a decision. /blog/how-to-choose-a-deductible Erie Insurance