What is a deductible and how to choose one

What a deductible is

The deductible is the part of a claim you pay yourself. The insurance company pays the rest, up to your coverage limit.

Where a deductible applies

• Auto: collision and comprehensive, the coverages for your own car. There is usually a separate deductible for each.
• Liability: no deductible. When you damage someone else’s car or injure someone, you do not pay a deductible.
• Home: most claims have a deductible. Some policies have a separate wind and hail deductible, sometimes as a percentage of the home’s coverage, for example 1% or 2%.

Higher deductible, lower premium

Raising the deductible, for example from $500 to $1,000, usually lowers the premium. The question is whether the yearly savings are worth paying more when you have a claim.

A simple way to think about it: if you save about $100 a year by moving from $500 to $1,000, it takes about five claim-free years to “earn back” the extra $500.

How to choose

• Pick a deductible you could pay tomorrow without borrowing.
• If your car is older and worth little, a high deductible or even no collision coverage can make sense.
• If your car is financed or leased, check the maximum deductible your lender allows.
• Look at the price for two or three deductible options side by side before you decide.

Want to see how the price changes with different deductibles? Ask us, and we will show the options side by side.

This article is general information, not advice for your situation. Coverage, prices and discounts depend on the policy, the insurance company and your details.

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