If you choose to carry comprehensive and collision coverage, you will have to choose a deductible. This can be any amount your insurer offers, but typical deductibles are $250, $500 and $1,000. (They can be higher or lower, too.) The higher your deductible, the lower your premium. Everyone wants a lower premium, but you’ll have to be able to come up with the amount of your deductible should you ever need to repair or replace your car (if nobody else was at fault).
So, the first thing to consider when choosing a deductible is how much you could afford to pay out of your own pocket. The second consideration is how much you would save in premiums in exchange for the increased personal financial responsibility for damages or theft. For example, if increasing your deductible from $500 to $1,000 shaves $100 off your annual premium, then you would be ahead of the game if you didn’t have to come up with your deductible for at least five years.
How much your premium drops with a higher deductible can vary widely. In some cases, the meager savings are not worth the higher risk. In other cases, you could save a bundle.
Some drivers choose to pay a slightly higher premium in exchange for a lower deductible because they know they can afford the relatively small additional monthly, semi-annual or annual premium payment but believe it is unlikely they would be able to save up the much larger deductible. (It’s important to be aware that the deductible applies to every single claim you make, not just once per premium period or once a year. That’s another reason some drivers choose to have a low deductible.)
Some insurers require those who they consider high-risk drivers to have a higher deductible to reduce the likelihood that they will have to pay out for damages.
