Choosing a Deductible: High vs. Low Excess — What's Right for You?

High vs. low deductible at a glance

What a deductible actually does

When you make a claim for collision or comprehensive damage, the deductible is the portion you pay first — the insurer covers the rest. A $500 deductible on a $3,000 repair means you pay $500 and your insurer pays $2,500. In the UK, the equivalent is called the excess; it works identically, though it's often split into a compulsory excess (set by the insurer) and a voluntary excess (chosen by you). Only the voluntary portion is negotiable.

The break-even calculation

This is the only maths you need. Take the difference between two deductible options and divide by the annual premium saving.

Example: Moving from a $500 to a $1,000 deductible saves $28/month ($336/year). You're taking on an extra $500 of risk. $500 ÷ $336 = 1.49 years. If you don't file a claim within 18 months, you're ahead. Given that the average US driver files a collision claim roughly once every 10 years, the higher deductible wins financially over time — provided you can cover the $1,000.

When a low deductible makes sense

1. Your emergency fund is under $1,000 — you can't absorb a large out-of-pocket expense without going into debt.
2. You live or park in a high-risk area (theft, vandalism, weather events) and expect to claim more often.
3. You're a newer driver with a higher probability of a minor collision.
4. Your car is financed — lenders sometimes require low deductibles on comprehensive and collision.

When a high deductible makes sense

1. You have 3–6 months of living expenses saved — the deductible won't break you.
2. You have a clean record and low annual mileage.
3. Your car is older and not worth a large repair bill — raising the deductible keeps premiums proportional to the car's value.
4. You want to self-insure small dents and use the policy only for large losses.

The UK voluntary excess decision

In the UK, you'll be asked for a voluntary excess on top of the compulsory excess the insurer sets. Adding £200–£500 in voluntary excess can shave 10–20% off premiums. The same principle applies: only take on voluntary excess you can genuinely pay. If your compulsory excess is already £350 and you add £300 voluntary, a claim could cost you £650 before the insurer pays a penny.

Common mistakes

1. Choosing the highest deductible to minimise premiums, then not saving the difference. If you raise the deductible, put the monthly saving into an emergency fund.
2. Applying deductibles to third-party claims. Deductibles don't apply to liability. Don't confuse the two.
3. Never reviewing your deductible. As your savings grow or your car depreciates, your optimal deductible changes — review it at every renewal.