Car Insurance Deductibles Explained
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If you recently filed an auto insurance claim, you’re probably expecting your insurance company to pay to cover the damages — but if you have comprehensive or collision insurance, you may have to cover your deductible first. Your deductible is a set amount of money you’re responsible for paying before the insurer covers the rest of your losses.
You’ll choose your deductible amount when you buy coverage. Usually, it’s between $100 and $2,000, with most drivers choosing a $500 deductible. A higher deductible results in lower premiums, and vice versa.
Not all types of insurance claims require a deductible, but many do, so it’s important to understand how deductibles work. This guide will explain everything you need to know.
What Is a Car Insurance Deductible?
A car insurance deductible is money you must pay when you file an insurance claim before the insurer pays for damages to you or your vehicle.
The amount of your deductible is deducted from the insurance payout you receive. You cover the deductible out of your pocket, and the insurer pays for the remainder of your covered losses, up to your policy limits.
How Car Insurance Deductibles Work
You typically choose a deductible when you buy collision or comprehensive coverage for your vehicle, and you may be able to pick a different deductible for different insurance coverages.
When you make a covered claim, you have to pay the deductible before the insurer covers the rest of the losses. You’ll pay a deductible for each claim you make under each coverage type when a deductible applies. For example, a deductible usually applies to collision coverage, which pays for damage to your car from a single-vehicle accident or a crash you caused. If you make multiple collision claims in a year, you pay the deductible each time.
Deductibles are usually between $100 and $2,000, but the most common deductible is $500. Increasing your deductible lowers your premiums, but you take on more financial risk with a higher deductible because if you make a claim, you pay more out of pocket.
For example, if you cause $5,000 of damage to your car in a covered accident and have a $250 deductible, you’d pay $250, and your insurance would cover the remaining $4,750. If your deductible is $500, you’d pay $500, and your insurer would cover the remaining $4,500.
Common Types of Car Insurance Deductibles
When you buy auto insurance, you typically purchase different kinds of protection. Some of your coverages come with a deductible, while others don’t. You usually have to pay a deductible when you make a claim under the following types of insurance coverage.
Comprehensive coverage pays for damages to your vehicle not caused by a car crash. Damage from animals, hail, and auto theft are some examples of losses that could result in a comprehensive claim. For example, if hail causes $2,000 in damage to your car and you have a $500 deductible, you’d pay $500 and your insurer would pay $1,500 for repairs.
Collision coverage pays for physical damage to your vehicle from a car crash you caused. If you’re at fault for a collision or are involved in a single-vehicle accident, you’d make a claim under your collision coverage for any resulting expenses. Just like in the example above, you’d pay your deductible, and the insurance would cover the remaining repair costs.
Uninsured and underinsured motorist coverage
Uninsured motorist coverage pays for damages from an accident with an uninsured driver. Underinsured motorist coverage protects against damage caused by a driver with too little insurance to cover all your expenses. If someone without enough insurance damages your property, your uninsured or underinsured coverage would pay for the repairs, minus your deductible.
Personal injury protection
Personal injury protection (PIP) pays for your and your passengers’ medical bills and lost wages in an accident, no matter who’s at fault. PIP coverage is required in states where no-fault insurance rules apply.
In no-fault states, each driver must file any claim for bodily injury with their own insurer for minor accidents rather than pursuing claims against the person who caused the crash. You can only make a claim against an at-fault driver when your losses are serious and exceed PIP limits. If you make a PIP claim, your insurer would pay your medical bills and partial lost wages, minus the deductible.
Not all PIP coverage has a deductible, so check your policy when making a claim.
Coverages that don’t require a deductible
Some coverages don’t require a deductible. When you make claims under those parts of your auto policy, you won’t have to worry about this out-of-pocket expense.
For example, you usually won’t have to pay a deductible when:
- Your liability coverage pays for damage you caused.
- You’re being compensated by another driver’s liability insurance for the damages they caused.
- You make a claim on your medical payments coverage, which pays for your collision-related medical expenses.
How to Choose the Right Deductible Amount
You should carefully consider how big your deductible should be when you buy insurance. You’ll want to think about how your choice affects your premium as well as your out-of-pocket costs if you’re involved in an accident. Here are some of the key factors to consider.
How deductibles affect your premiums
When you choose a higher deductible, you’ll save on your auto insurance premiums because your insurer isn’t risking as much, since you have to pay a larger portion of your claim.
The amount you can save by choosing a higher deductible varies based on your insurer and how big the deductible increase is. You could save as much as 15% to 30% by increasing your deductible from $200 to $500 for collision and comprehensive insurance. And if you increase your deductible to $1,000, you could save 40% or more on premiums.
High vs. low deductible
Both high and low deductibles come with pros and cons. Here are some of the biggest advantages and disadvantages of each option.
|Lower auto insurance premiums
|Higher costs if you make a claim
|Lower out-of-pocket expenses if you file a claim
|Higher auto insurance premiums
Other factors to consider
It may seem like a no-brainer to choose a high deductible to get cheaper car insurance, but other factors are worth considering besides the up-front costs of buying a policy.
Here are some other key things to think about when you decide how big your deductible should be.
How much you can afford to pay out of pocket
You’ll need to cover your deductible if you make an auto insurance claim — so if you don’t have the money, it could prevent you from getting back on the road. The Federal Reserve found that 40% of adults can’t cover an unexpected $400 expense without going into debt, so choosing a high deductible could be a big mistake for many drivers.
Consider the dollar figure you could afford to pay if you had to make a claim, and don’t choose a deductible higher than that amount.
Your lender’s requirements
Auto lenders sometimes set limits on how high your deductible can be. Since your car is collateral guaranteeing the loan, your lender may want to ensure your deductible is low enough that you can afford to pay to get your vehicle fixed.
Your risk level
The higher the risk of an auto accident, the more sense it makes to choose a low deductible since you’re more likely to have to pay it. Your previous accident history, how often you drive, and your car’s collision-avoidance features can all affect your likelihood of causing a collision — and therefore having to pay your deductible.
Some of the best car insurance companies offer diminishing deductibles, but you’ll typically need to opt into this type of coverage and pay extra premiums.
Also called vanishing deductibles or disappearing deductibles, diminishing deductibles reward you for safe driving behavior. If you pay for diminishing deductible coverage, your deductible goes down each time you renew your policy if you didn’t make a claim during the policy period.
For example, if you had a $500 deductible, it might go down to $450 when you renew your policy after six months — if you haven’t filed a claim. After another renewal, it could drop to $400, and if you remain accident-free and continue renewing your policy, it might go all the way to $0, depending on your insurance company.
When Do You Need to Pay a Deductible?
You should be prepared to pay a deductible if you file an auto insurance claim. Usually, this happens if you’re making a claim on your collision or comprehensive coverage, uninsured or underinsured motorist coverage, or personal injury protection.
When you make your claim, your insurer will pay their portion of it, but you’ll need to cover the deductible amount first. Usually, you pay this directly to the repair shop or, if you’re buying a new car, the dealer when you purchase your vehicle.
What happens if you can’t afford your deductible?
If you can’t afford your deductible, you’ll need to find a way to make up the difference before you can get repairs completed or buy a new vehicle. Fortunately, you have a few options, including:
- Working out a payment plan with the repair shop
- Continuing to drive your damaged car until you can afford the repairs
- Taking out a loan or borrowing the money from a friend
When are you not required to pay a deductible?
The good news is that sometimes a deductible won’t apply when you file an auto insurance claim. Here’s when that can happen.
Another driver is at fault
If another driver caused an accident, you’ll make a claim on their liability insurance policy. You won’t pay a deductible, and neither will the at-fault driver, since deductibles don’t apply to liability coverage.
You have a vanishing deductible
If you have a vanishing deductible, you may pay less than the original deductible amount or even pay no deductible at all.
The amount you pay depends on how long you’ve been accident-free, as this directly affects how much your deductible is reduced. For example, if you started with a $250 deductible and your insurer reduces it by $50 for every six months you’re accident-free, you may have a $0 deductible if you haven’t had a collision for 30 months.
You have a collision deductible waiver
A collision deductible waiver is an optional add-on to your auto insurance. While not widely available, this add-on allows you to avoid paying your deductible when an uninsured driver hits you, and your collision coverage pays for your damages.
You have full-glass coverage
Full-glass coverage is an optional add-on to your auto insurance that allows you to avoid paying a deductible if you make a claim for windshield or other auto glass repair or replacement.
Car Insurance Deductible FAQs
Still have questions about how deductibles work? Check out some answers to some of the most commonly asked questions about auto insurance deductibles.
What is a good car insurance deductible?
A good car insurance deductible is one that’s appropriate for you based on your risk tolerance and the amount you can afford to pay out of pocket if you file an insurance claim.
The most common deductible amount is $500, but you may want a higher deductible if you prefer lower premiums and are OK with paying more if you make a claim. On the other hand, you may be better off with a lower deductible if you’d rather pay higher premiums to avoid being forced to come up with a lot of money when an accident happens.
Is it better to have a $500 or $1,000 deductible?
Your deductible is the amount that you must pay when you make an auto insurance claim before your insurer pays for the rest of your damages. A $500 deductible allows you to pay out half the amount of a $1,000 deductible, but, you’d pay higher auto insurance premiums for a policy with a $500 deductible.
Can you change your deductible?
You can change your deductible by contacting your insurer and asking to modify your coverage. You’ll pay more in premiums if you reduce your deductible but will save if you increase it. However, when you cause an accident, the deductible that was in place when the crash occurred applies. You can’t get into a collision and then call to change your deductible to have it applied to the claim.
What if your car repair costs are less than your deductible?
If your car repair costs are less than your deductible, it usually doesn’t make sense to make an auto insurance claim. Making a claim results in higher premiums, and you’d get no benefit from doing so since your insurer only covers losses after your deductible has been met.
Do you have to pay a deductible if you damage someone else’s car but not your own?
Liability insurance doesn’t have a deductible, so you don’t have to pay out of pocket if you cause damage to others. However, if you’re at fault for an accident, you could face higher insurance premiums going forward because of the accident.
If you had a diminishing deductible policy that reduced your deductible for each accident-free period, you may see your deductibles return to their previous amount due to the accident.
- National Association of Insurance Commissioners, “A Consumer’s Guide to Auto Insurance,” Accessed December 4, 2023.
- Insurance Institute for Highway Safety, “Auto Insurance Basics,” Accessed December 4, 2023.
- Insurance Institute for Highway Safety, “Nine Ways To Lower Your Auto Insurance Costs,” Accessed December 4, 2023.
- Insurance Institute for Highway Safety, “Facts + Statistics: Uninsured Motorists,” Accessed December 4, 2023.
- Board of Governors of the Federal Reserve System, “Report on the Economic Well-Being of U.S. Households in 2022 – May 2023,” Accessed December 4, 2023.
- Veridian Credit Union, “Am I Required To Obtain Full Coverage Insurance On My Loans?,” Accessed December 4, 2023.
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