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
Is it better to have a $500 or $1,000 deductible? It's better to have a $500 deductible if you're a driver that has been in more than one accident or has gotten a DUI in the last three years. If you're more likely to get into an accident, you won't want to pay out a higher deductible.
Is it better to have a $500 deductible or $1000? ›
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.
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.
Is a higher or lower deductible better? ›
With an HDHP, it can be challenging to predict how much you'll need to pay when you need care. That's why a high deductible plan works better for those who can handle taking on greater financial risk. A low deductible plan comes with lower financial risk, though you'll pay more each month for 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 $500 a high deductible? ›
The most popular car insurance deductible is $500, but they can range from $0 to $2,000. Most insurers set the default deductible at $500, but it's common to see $250, $1,000 or $2,000 deductibles.
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.
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 hmo or PPO better? ›
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.
Which is better, high deductible or PPO? ›
In general, HDHPs are better suited for people who are young, single, healthy, or wealthy. PPO plans tend to be better options for people who are older, have a family, or have chronic medical conditions.
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.
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.
What does $1000 deductible mean for car insurance? ›
Generally, a deductible is the amount you're responsible to pay when a covered loss occurs. For example, say you have a $1,000 deductible but have $2,000 in covered damages. You're responsible for the first $1,000 of damages and your insurance company is responsible for the other $1,000 of covered damages.
What is considered high deductible? ›
Per IRS guidelines in 2025, an HDHP is a health insurance plan with a deductible of at least $1,650 if you have an individual plan or a deductible of at least $3,300 if you have a family plan.
Is $3000 a high deductible? ›
Is $3,000 a high deductible? Yes, $3,000 is a high deductible. According to the IRS, any plan with a deductible of at least $1,400 for an individual or $2,800 for a family is considered a high-deductible health plan (HDHP).
Is a $1500 deductible high? ›
The benefits of a high-deductible versus a low-deductible medical plan. In 2023, health insurance plans with deductibles over $1,500 for an individual and $3,000 for a family are considered high-deductible plans.
