Deductibles: What Should My Insurance Deductible Be?

September 20, 2018

what should your insurance deductible be?An insurance deductible is the amount of money you have to pay from your own pocket before your insurance coverage kicks in. As you probably know, you have a home insurance deductible and several different car insurance deductibles (usually one for “collision” and one for “comprehensive” coverage; there is no deductible for the liability portion of your car insurance).

Deductible amounts typically range between $200 and $2,000. Where do these amounts come from? And what should your deductible be?

Let’s look at some FAQs surrounding these numbers:

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.”

What’s the average home insurance deductible?

For home insurance, average deductibles range between $500 and $1,000. States with higher average premiums typically have higher deductibles, too.

Is there any advantage to raising my deductible?

Yes, raising your deductible will almost certainly lower your premium—whether it’s your auto, renter’s or homeowner’s policy. Since Massachusetts is the 9th most expensive state for car insurance, that’s good news for lots of MA drivers.

Keep in mind though, savings potential depends on many factors—including your age, your driving record, and your coverage limits. Using state-specific data, some sources estimate that raising a Massachusetts deductible from $250 to $1,000, could save the average person 20 percent on annual car insurance. Raising it from $500 to $1,000 could yield a 14 percent savings. But again, these are just estimates.

When it comes to home insurance, savings can also be significant. This New York Times piece reports that raising a Massachusetts home insurance deductible from $500 to $2,000 could save as much as 20 percent or more.

Ask your local insurance agent to review your savings potential with you: 508.339.2951.

Should I raise my deductible for car/home insurance?

That all depends on you and your family’s financial situation. If you have an emergency fund with enough excess cash available (experts recommend saving up at least two months’ worth of living expenses), you can probably afford to raise your deductible to $1,000 or more. Doing so will definitely lower your monthly insurance bills. And if you don’t have to file a claim for two, three, or four years… you could save a significant amount of money over time. (FYI: the average car owner drives for 8.3 years without submitting a claim. SUV and pickup truck owners have claims roughly every 6.5 years).

Whether or not to raise your deductible also depends on your tolerance for small dings and scratches. If you’re the type of person who values a flawless exterior, and you submit a claim whenever small repairs surface, a higher deductible will mean the cost of those small repairs land fully on your shoulders.

Can I raise my deductible at any time?

Yes. Just like your can change your car insurance policy itself, you can change the terms of a policy at any time. But we recommend re-evaluating this number annually, before your policies renew, along with all the other factors that go into your insurance plan.

Do most car accidents cost more than the deductible?

Yes, but lots of variables come into play when calculating the cost of an average collision claim. In 2016, according to the Insurance Information Institute (III), the average car collision claim totaled $3,435, while the average comprehensive claim totaled $1,748. How much of those totals are you prepared to pay on your own?

Apart from my deductible, how much car insurance should I have?

Great question! Click on the link in the question above. We’ve covered that topic—including Massachusetts’ car insurance requirements and beyond—in an earlier blog.

Are there other ways to save money on insurance?

Yes! We’ve listed some of the most common insurance discounts here. Other options include added safety measures or home updates like an alarm system, an emergency generator, a new roof, new electrical or plumbing systems. As always, we like to remind people that insurance is a very individualized topic. What makes sense for your neighbor won’t necessarily make sense for you.

If you’re looking for ways to lower your insurance bill—for home, renter’s, condo, or vehicle coverage—don’t hesitate to call our expert team: 508.339.2951.