How to choose a deductible: $500 vs $1,000 and beyond

Choose the highest deductible you could pay tomorrow from savings without borrowing, then check how many claim-free years it takes for the premium savings to cover the extra risk. If that break-even point is about three or four years or less, the higher deductible usually makes sense; if it is much longer, the savings are too small. Set collision and comprehensive separately, and stay within any maximum your lender requires.

This guide assumes you already know what a deductible is and how it is applied; if not, start with how car insurance deductibles work.

Step 1: Set your ceiling from savings

Your deductible is money you will owe on short notice, often while also dealing with a rental car, time off work or medical bills. Before looking at prices, decide the most you could pay without a credit card balance or a loan.

• If you have $300 in emergency savings, a $1,000 deductible is a bill you cannot pay, no matter what it saves.
• If you have several thousand dollars set aside, a $1,000 or $1,500 deductible is often comfortable.

That number is your ceiling. Everything above it is off the table.

Step 2: Get the actual price difference

The premium savings from a higher deductible vary widely by insurer, state, car and driver, so the only useful figures are your own. Ask your agent or run quotes for the same policy at two or three deductible levels, changing nothing else. Your declarations page shows collision and comprehensive premiums separately, so you can see exactly what each deductible costs.

Step 3: Calculate the break-even

The break-even is the number of years of premium savings it takes to equal the extra amount you would pay on one claim.

Break-even years = (higher deductible − lower deductible) ÷ annual premium savings

Hypothetical examples:

If you would go well past the break-even point without a claim, the higher deductible wins. If the break-even is long, you are paying little to insure against a relatively large out-of-pocket hit, and the lower deductible may be the better deal. The deductible break-even calculator runs this math with your own numbers.

Step 4: Think about how often you claim

The break-even works best when you are honest about your claim risk. Factors that point to a lower deductible:

• Inexperienced drivers on the car, such as a newly licensed teen.
• Long daily commutes or heavy city driving.
• A recent history of claims.
• Living where hail, flooding, theft or deer strikes are common (relevant to comprehensive).

Factors that point to a higher deductible:

• Years without a claim and a short commute.
• Being likely to pay small claims yourself anyway. Filing for damage only a few hundred dollars above the deductible can cost more in future premiums than it pays. If you would not file a $1,300 claim on a $500 deductible, a $1,000 deductible costs you little. See should you file a claim or pay out of pocket?.
• A garaged car in a low-theft, low-weather-risk area.

Step 5: Set collision and comprehensive separately

They do not have to match, and often should not.

• Collision claims depend partly on your driving, and the premium is usually larger, so the savings from a higher deductible are larger too.
• Comprehensive claims come from weather, theft, animals and glass, which you cannot control, and the premium is usually smaller. Pairing a higher collision deductible with a lower comprehensive deductible is often a cheap way to keep small, uncontrollable losses covered.
• Glass: if you live in a state without zero-deductible glass rules, ask what full glass coverage would cost; a cracked windshield can otherwise fall entirely under your comprehensive deductible. See full glass coverage and zero-deductible windshield repair.

Step 6: Check your loan or lease

If the car is financed or leased, the contract usually requires collision and comprehensive and may set a maximum deductible. Choosing a deductible above that maximum can put you in breach of the agreement. The lienholder is listed on your declarations page; read the insurance clause in your contract or ask the lender.

Step 7: Match the deductible to the car's value

On an older car, a deductible can eat most of a claim. If your car's actual cash value is $4,000 and your collision deductible is $1,000, the most collision can ever pay is $3,000. At some point the better move is dropping collision rather than adjusting the deductible. The Should I drop full coverage? calculator helps you decide.

A worked example

Say you have $2,500 in emergency savings, drive a car worth $18,000 that is paid off, and have no claims in eight years (hypothetical). Your quotes show:

• Collision: $500 deductible costs $420 a year; $1,000 costs $300 a year. Savings $120; break-even about 4.2 years.
• Comprehensive: $250 deductible costs $140 a year; $500 costs $115 a year. Savings $25; break-even 10 years.

A reasonable choice is the $1,000 collision deductible, which you can cover from savings and which pays for itself in a little over four claim-free years, paired with the $250 comprehensive deductible, where the savings from raising it are too small to bother. You save $120 a year without exposing yourself to a bill you cannot pay.

Revisit every year or two

Your savings grow, your car loses value, and prices change. Recheck at renewal, when you pay off a loan, when a teen starts driving, or when you move.

Key takeaways

• Start with the most you could pay tomorrow from savings; never choose a deductible above that.
• Use break-even years: deductible difference divided by annual savings. Short break-evens favor the higher deductible.
• Set collision and comprehensive separately; a lower comprehensive deductible is often cheap.
• Lenders and lessors may cap your deductible.
• On a low-value car, consider dropping collision instead of fine-tuning the deductible.