A $1,000 deductible is better than a $500 deductible if you can afford the increased out-of-pocket cost in the event of an accident, because a higher deductible means you’ll pay lower premiums. Choosing an insurance deductible depends on the size of your emergency fund and how much you can afford for monthly premiums.
How to Choose Between a $500 and a $1,000 Deductible
1. Figure out how much you would save on your premium with a $1,000 deductible.
The goal is to determine if those savings are worth paying an extra $500 out of pocket after an accident. Car insurance companies typically use a $500 deductible to give quotes, which means you’ll need to make a point of checking how things change with a $1,000 deductible.
Remember that the premium savings will not always be proportional to the extra out-of-pocket costs after an accident.For example, Progressive reports that doubling your deductible from $500 to $1,000 may result in only a 28% decrease in premiums on average.
2. Consider how much you could afford to pay if an accident happened today.
Accidents can happen at any moment, so if you don’t have a lot of savings or expendable income, a lower deductible is usually a safer choice to avoid financial stress after an accident.
3. Determine your car’s actual cash value.
If you have an old car that’s only worth $2,500, for example, you probably don’t want to carry a $1,000 deductible. It’s too close to the total value of your vehicle, which means the replacement cost wouldn’t put much more stress on your finances than the deductible itself.
4. Make a decision based on your financial situation and preferences.
After evaluating your income, monthly expenses, savings, available credit and car value, it should be clear which is a better deal for you: saving monthly on premiums or saving in the event of an accident.
Although $500 and $1,000 are the most common deductibles, you may want to consider other deductible amounts, too. Some companies offer lower and higher options, such as $100, $250 or $2,500 deductibles.
No matter what you decide, be sure to set aside enough cash to cover your deductible before you need to make a claim. To learn more, check out WalletHub’s guide to car insurance deductibles.
This answer was first published on 01/26/22 and it was last updated on 03/07/23. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
FAQs
If you're more likely to get into an accident, you won't want to pay out a higher deductible. However, if you're generally a safer driver, your car insurance premiums will be lower with a $1,000 deductible.
Is it better to have a $500 or $1000 deductible? ›
A low deductible of $500 means your insurance company is covering you for $4,500. A higher deductible of $1,000 means your company would then be covering you for only $4,000. Since a lower deductible equates to more coverage, you'll have to pay more in your monthly premiums to balance out this increased coverage.
What is the best deductible amount? ›
Before you choose a deductible, most insurance professionals recommend you figure out what you can afford to pay if your car is damaged in an accident. If your budget allows for a maximum out-of-pocket expense of $500, you probably should not choose a deductible higher than $500.
Is a higher or lower deductible better? ›
Key takeaways. Low deductibles are best when an illness or injury requires extensive medical care. High-deductible plans offer more manageable premiums and access to HSAs. HSAs offer a trio of tax benefits and can be a source of retirement income.
What does $1000 deductible mean? ›
For example, if you have a health insurance policy with a $1,000 deductible and you receive a medical bill for $2,000, you would be responsible for paying the first $1,000 and your insurance would cover the remaining $1,000.
What is the disadvantage of having a higher deductible? ›
The main drawback to choosing an HDHP is having potentially high out-of-pocket expenses when you receive covered services during the year.
Is a $1,000 dollar deductible bad? ›
A $1,000 deductible is better than a $500 deductible if you can afford the increased out-of-pocket cost in the event of an accident, because a higher deductible means you'll pay lower premiums. Choosing an insurance deductible depends on the size of your emergency fund and how much you can afford for monthly premiums.
What is too high of a deductible? ›
The deductible is separate from the monthly premiums. For individuals, a health plan can qualify as high deductible if the deductible is at least $1,350, and the max out-of-pocket cost (the most you'd pay in a year for medical expenses, with insurance covering everything else) is at least $6,750.
Do you ever pay more than your deductible? ›
You generally pay coinsurance for healthcare services after you reach your deductible. Coinsurance is when you split costs with your health insurance plan. Coinsurance is typically a percentage. You may have to pay 20% for in-network healthcare services while your plan picks up the other 80%.
Does a higher deductible make insurance cheaper? ›
The higher a deductible, the lower the annual, biannual or monthly insurance premiums may be because the consumer is assuming a portion of the total cost of a claim.
HMO plans typically have lower monthly premiums. You can also expect to pay less out of pocket. PPOs tend to have higher monthly premiums in exchange for the flexibility to use providers both in and out of network without a referral. Out-of-pocket medical costs can also run higher with a PPO plan.
Do copays go towards deductible? ›
You pay a copay at the time of service. Copays do not count toward your deductible. This means that once you reach your deductible, you will still have copays. Your copays end only when you have reached your out-of-pocket maximum.
Is it good to have a $0 deductible? ›
No-deductible health insurance plans may be a good idea for some populations, such as those who expect to have significant medical expenses, like surgery or long-term care. However, remember that because there is zero deductible, the monthly premium for the plan will be higher than a standard policy.
What does a $500 deductible mean? ›
After you pay the car deductible amount, your insurer will cover the remaining cost to repair or replace your vehicle. Example:You have a $500 deductible and $3,000 in damage from a covered accident. Your insurer will pay $2,500 to repair your car, and you'll be responsible for the remaining $500.
What is a good deductible amount? ›
What's the average car insurance deductible? There aren't any hard statistics on this, but industry sources say a $500 deductible is considered “standard.” There are good reasons to opt for a higher deductible, though…
What is a good comprehensive deductible? ›
Comprehensive coverage: Deductibles for comprehensive coverage, which covers damage to the vehicle from a non-driving peril, like extreme weather, theft and vandalism, are typically set at $500 or $1,000. Collision coverage: Drivers can typically choose to pay $500 or $1,000 as their collision deductible.
Is it better to have a higher or lower car insurance deductible? ›
If you're leasing or financing your car or living on a tight budget, a lower deductible can give you more peace of mind. If you have a clean driving record or live in a low-traffic city, getting a high deductible could save you more money in the long run.
Is 500 a high deductible? ›
Deductibles can vary. Some may be around $500, while others could be several thousand dollars. A plan that has a deductible of at least $1,400 (for individuals) or $2,800 (for a family) is considered a high-deductible plan.
What is the advantage of having a high deductible? ›
Savings tip: HDHPs have lower premiums. That means you pay less every month for your plan. Plus, you're covered for many preventive services and screenings at no cost without having to meet your deductible.
