Car Insurance Deductible Simulator

Understanding Car Insurance Deductibles

What Is a Deductible?

Your deductible is the amount you pay out-of-pocket before your insurance pays for a claim. For example, if you have a $1,000 deductible and file a $4,000 claim, you pay $1,000 and insurance pays $3,000.

Key Point: You pay your deductible per claim, not per year. If you file 3 claims in one year with a $500 deductible, you pay $500 three times ($1,500 total).

The Trade-Off: Premium vs. Deductible

Higher Deductible = Lower Premium

• $250 deductible: $2,400/year premium (higher)
• $500 deductible: $2,100/year premium
• $1,000 deductible: $1,800/year premium
• $2,000 deductible: $1,500/year premium (lower)

Example Savings: Choosing a $1,000 deductible over $250 saves you $600/yearin premiums. Over 5 years with no claims, that is $3,000 saved.

But... Higher Out-of-Pocket When You Claim

The catch: If you file a claim with a $1,000 deductible, you pay $750 more out-of-pocket than with a $250 deductible. So if you file claims frequently, the premium savings may not offset the higher deductibles.

The Hidden Cost: Rate Increases

Most people only think about the deductible when deciding whether to file a claim. But the bigger cost is often the rate increase that follows.

How Rate Increases Work:

• At-fault collision: Your rate increases by 20-40% for 3-5 years^[1]
• Comprehensive claim (hail, theft, vandalism): Increase by 0-10% for 1-3 years^[2]
• Not-at-fault accident: Often no increase (varies by state)
• Multiple claims: 40-60% increase, or you may be dropped entirely

Real-World Example: Should I File a $2,000 Claim?

Scenario: You backed into a pole. Repair cost: $2,000. Your deductible: $500. Your annual premium: $1,800.

Option A: File the Claim

• Deductible: $500 (out-of-pocket now)
• Rate increase: +30% for 3 years = $540/year extra
• Total increase over 3 years: $1,620
• Total cost: $500 + $1,620 = $2,120

Option B: Pay Out-of-Pocket

• Repair cost: $2,000 (one-time payment)
• Rate increase: $0
• Total cost: $2,000

✅ Decision: Pay out-of-pocket. You save $120 and avoid having a claim on your record.

When to File a Claim vs. Pay Out-of-Pocket

✅ Always File If:

• Repair cost > $5,000: Too expensive to pay yourself
• Total loss: Car is totaled (insurance pays actual cash value minus deductible)
• Injury involved: Medical costs covered by insurance
• Other party uninsured: Using your uninsured motorist coverage
• Legal requirement: Hit-and-run, serious accident

💰 Consider Paying Out-of-Pocket If:

• Repair cost < $2,500: Often cheaper than (deductible + rate increases)
• Minor cosmetic damage: Scratches, small dents you can live with
• Repair close to deductible: If repair is $1,200 and deductible is $1,000, insurance only pays $200 but your rate still increases
• Multiple recent claims: Avoid being labeled high-risk or dropped
• First year with insurer: Establish good claim history before filing

Decision Formula:

Total Filing Cost = Deductible + (Rate Increase per Year × Years)

If Total Filing Cost > Repair Cost, pay out-of-pocket. Otherwise, file the claim.

Choosing Your Optimal Deductible

Match Deductible to Emergency Fund

Financial experts recommend having an emergency fund equal to or greater than your deductible.^[3]

• Emergency fund < $1,000: Choose $250-500 deductible (you cannot afford higher)
• Emergency fund $1,000-$3,000: Choose $500-1,000 deductible
• Emergency fund > $3,000: Choose $1,000-2,000 deductible (maximize savings)

Consider Your Claim History

• File claims every 1-2 years: Lower deductible (you will use it)
• File claims every 3-5 years: Medium deductible ($500-1,000)
• File claims rarely (5+ years): Higher deductible (save on premiums)

Factor In Your Driving Profile

• New/young driver: Lower deductible (higher accident risk)
• Experienced driver: Higher deductible (lower accident risk)
• High-traffic area: Lower-medium deductible
• Rural/safe area: Higher deductible

Vehicle Value Matters

• Car value < $5,000: Consider dropping collision/comprehensive entirely (only keep liability)
• Car value $5,000-$15,000: Medium deductible ($500-1,000)
• Car value > $15,000: Lower-medium deductible to protect investment

Premium Savings By Deductible

Typical annual savings when increasing deductible (varies by insurer, location, vehicle):^[4]