Car Insurance Deductibles: How do They Work?

Why You Can Trust Compare.com

At Compare.com, it’s our mission to find simple ways to help our customers save money on the things they need. While we partner with some of the companies and brands we talk about in our articles, all of our content is written and reviewed by our independent editorial team and never influenced by our partnerships. Learn about how we make money, review our editorial standards, and reference our data methodology to learn more about why you can trust Compare.com.

Written by Nick Versaw

Updated May 6, 2022

Whether you’re buying car insurance for the first time or you just want to renew a policy, car insurance can be complicated. There are so many different aspects to consider, and terms that you might be unfamiliar with. One of those is the car insurance deductible.

Deductibles aren’t unique to car insurance — you’ll find them on other types of insurance coverage too — but they’re an important factor in managing your insurance costs. If you get into an accident and need to file a claim, you’ll want to know more about how your deductible works. It also plays a role in determining your car insurance premium.

Read on to learn more about car insurance deductibles and how you can choose the deductible amount that’s the right fit for your needs.

What Is a Car Insurance Deductible?

A deductible on an insurance policy is the amount of money that you’ll have to pay out of pocket if you file a claim if you have comprehensive and/or collision coverages. Unlike insurance premiums, which you have to pay every month (or annually, depending on your payment schedule), the deductible only comes into play when you file an insurance claim.

If you have a policy with a low deductible, then your insurer will pay most (or all) of the cost of repairs if you get into an accident. If you choose a policy with a high deductible, then you’ll have to pay more and your insurer will cover less. That’s why policies with a higher deductible amount tend to have a lower premium and vice-versa.

Deductibles are found in many other types of insurance policies, such as homeowners insurance and renters insurance. However, they work a little differently when it comes to auto insurance. For example, your health insurance deductible is usually calculated on an annual basis, so once you reach the deductible amount in any given year, your insurer pays the rest.

Car insurance deductibles are specific to each occurrence — meaning that if you file a claim for two separate accidents, you’ll have to pay your deductible twice before your car insurance company will pay its share.

How Do Car Insurance Deductibles Work?

Having a deductible on your policy means both you and your carrier share some of the financial responsibility in the event of a loss. You will be responsible for paying your portion of the damages through your deductible, and your carrier is responsible for paying the remainder (up to the limit outlined in your policy).

Because of this, deductibles can help to act as a deterrent — when you have a possibility of financial loss, you may try harder to avoid risky situations.

Deductibles are for first-party coverage only. This means that if you’re involved in a car accident, your deductible doesn’t apply to any damage to the other vehicle. The other driver may have their own car insurance coverage and their own deductible.

When you purchase an auto insurance policy, you’ll be able to select your deductible. Common deductible amounts are $250, $500, or $1,000. You can change the amount when you renew your policy if you decide a different amount would be better for you.

How Are Deductibles Calculated?

A deductible lowers the amount your carrier will pay if a claim is filed. For example, if you select a $1,000 deductible and sustain $4,500 worth of damage to your vehicle, your carrier will pay $3,500, while you are responsible for the remaining $1,000.

On the other hand, if you selected a $250 deductible and sustained $4,500 in damages, your carrier would pay $4,250. You would only need to pay $250 for car repairs.

Auto insurance deductibles are usually in addition to the policy limits, so your coverage is not reduced by the amount of your deductible. For example, if you have a policy with a $10,000 limit and a $500 deductible, your policy limit is $10,000 once you have paid $500 in out-of-pocket costs.

In some types of policies, the deductible is subtracted from your coverage limit, so it’s important to talk to your agent to better understand your policy.

Which Deductible Amount Should You Choose?

You’re responsible for paying your deductible when you submit a claim, so be sure you pick a deductible you can afford. You’ll have to weigh the chances of submitting a claim against the potential savings from a higher deductible to make this decision.

Car insurance deductible amounts are typically $250, $500, $1,000, $2,000, or $2,500. The more commonly found deductibles are in the mid-range, usually $500 to $1,000. It is up to you as the policyholder to decide what is best for you.

Remember that if you choose a higher deductible, your car insurance company will only cover damages above that amount. So if the repairs cost less than the deductible, your out-of-pocket costs would be the same as if you didn’t have coverage at all!

How Does the Deductible Affect the Price of Insurance?

Having a deductible on your insurance policy tends to lower your insurance rates. This is because the policyholder is retaining a portion of the risk.

If you have a deductible of $1,000, for example, your insurance company won’t have to pay out reimbursements for minor damages like a dent from a stray shopping cart or scratch from the teen driver coming too close to the garage door.

Choosing a lower deductible means the insurance company has a higher likelihood of paying out for a claim. Therefore, your rate will be higher. To put it simply:

Higher deductible = lower rates

Lower deductible = higher rates

Increasing your deductible from a minimal amount to a high deductible can save you up to 40% on premiums, but it comes at a cost when you need to file a loss. Every driver is different, so your actual savings may differ.

The downside of raising your deductible is that you’ll have to pay more in the event of a loss. However, for many people, this benefit of a lower monthly premium outweighs the risk of paying their deductible if they file a claim.

What If You Have Multiple Types of Coverage?

If you have both collision insurance and comprehensive insurance, you’ll need to select a deductible for each type of coverage. You can choose the same amount for each, but you also may decide to have one higher than the other. The same goes for bodily injury insurance, liability insurance, and uninsured motorist coverage.

For example, you might choose a policy with a low deductible for collision coverage and liability coverage, and a higher deductible for comprehensive coverage. Since each type of claim is handled separately, it’s important to take the total of all relevant deductibles into consideration.

If your vehicle is leased or financed, your lender might require a deductible of a certain limit — usually $500 or less. In this case, you will need to select a deductible within their requirements. They would rather you keep your deductible low to ensure you can pay it and fix your vehicle if it gets damaged.

Some insurers offer auto insurance policies with no deductible. But remember that your premium will likely be higher for a zero-deductible policy, so shopping around can help you find the best deal.

Your insurance rates are determined by multiple factors, so enter your ZIP code here to compare auto insurance quotes in your region:

When Do You Pay a Deductible?

Your deductible is generally paid when you make repairs to your damaged property. If you are involved in an accident and file a claim with your carrier, they will usually pay the cost to repair your vehicle up to your policy limit, minus your deductible.

When you file a claim, your carrier will remind you of your deductible and explain how to pay it. If you’re getting your vehicle fixed, you will usually pay the deductible directly to your body shop or mechanic. This way, they’ll be paid in full between your deductible payment plus the cost of repairs paid by your carrier.

If you’re not going to repair the damages to your vehicle, then you won’t need to pay your deductible. If the damages to your vehicle fall below your deductible, you will be responsible for the entire cost of repairs.

What Are Disappearing Deductibles?

A disappearing deductible is called many different things by different carriers — like vanishing deductible, diminishing deductible, declining deductible, and deductible savings. Your carrier may also have its own trademarked term.

Whatever it is called, it works the same way. A disappearing deductible is a deductible that decreases the longer you go without filing a claim. In some cases, this could make your deductible “disappear” or become $0 if you go long enough without a claim.

Car insurance companies may set aside $50 each year into a disappearing deductible fund, reducing your deductible by $50 for each claim-free policy year. In some states, the deductible cannot be zero, and so, even with a disappearing deductible, you may still have to pay a small amount, like $50, toward the deductible.

Not all auto policies have a disappearing deductible. However, many carriers do offer some version of this. Check your policy and add a disappearing deductible at renewal time if you would like to avoid paying it after a claims-free period.

Some carriers that offer a version of a disappearing deductible are:

Progressive – Deductible savings bank

Farmers – Declining deductible

Allstate – Deductible rewards

If you file a claim and use your disappearing deductible fund, be aware that it will reset following your claim. This means that if you have another claim soon after the first, your deductible will be the original amount and you won’t have any additional savings.

Carriers charge extra for disappearing deductibles, so you may need to weigh the cost of this benefit against your likelihood of using it before adding it to your policy.

How Can I Avoid Paying My Deductible?

The simplest way to avoid paying your deductible is to not submit a claim. However, if you are involved in an accident and have damages, you may not have that choice. In those cases, there are a few ways to mitigate paying your deductible.

Your mechanic or body shop may be willing to help you with your deductible — negotiate to ask if they will help cover it or pay it upfront and allow you to make payments over a few months to make the cost easier to manage.

If you are not at fault for the accident, ask your carrier if they will waive your deductible. In some states and under some circumstances, carriers can waive your deductible if they believe the other party is at fault.

If you do not think you are at fault for the accident — and the carriers agree — you can pursue the at-fault party for the recovery of your deductible. In this case, you would need to pay it upfront and then contact them to reimburse you.

Your carrier may help you recover from the other insurance company — this is called subrogation and can take several months. If you need to pursue the other driver directly, you may need to go to small claims court and file a suit against them.

Many times, if you are in an accident and the other party is also insured by your carrier, your deductible will be waived. This is an unlikely scenario you cannot control, of course, but it can happen.

Find the Best Car Insurance Rates Today

The average car insurance deductible in the U.S. can be anywhere from $0 to $1,000 or more depending on which policy you choose. The lower the deductible, the less you’ll have to pay if you file a claim — but the more you’ll pay in monthly premiums.

You can choose your deductible when you first sign up for a plan, or by contacting your insurance company or insurance agent when it’s time to renew it. You can also choose a different collision deductible and comprehensive deductible on the same policy.

You may want to shop around for multiple quotes to be sure you’re getting the best rate as you adjust your deductible. You can use our handy comparison tool to look at rates side-by-side, or visit our resources page to learn more about your options.

Just enter your ZIP code here to get started:

Car Insurance Deductible FAQs

How Can I Find Out if I Have a Deductible on My Car Insurance Policy?

Deductibles are commonly found in auto insurance policies. If you have one, you can find it listed with your coverage limits on the declarations page of your policy. It will be listed after its applicable limits.

For example, $15,000/$500 would mean a coverage limit of $15,000 with a $500 deductible. If you have an agent, you could also call them or your carrier directly.

Is It Worth Having a Higher Deductible to Lower Your Premium?

This depends on your situation. It may save you upwards of 40% on your premium to increase your deductible to a high value, but you will have to pay your deductible if you have a claim. The savings in your specific situation may vary. So, even though 40% sounds like a good deal, you may not find that much savings.

How Can I Add a Deductible to My Car Insurance Policy or Change My Current Deductible?

You can change your deductible at renewal by contacting your carrier or agent. You may want to shop for alternative carriers to be sure you’re getting the best rate as you adjust your deductible. Your best option is to compare as many companies as possible.

Nick Versaw Insurance Managing Editor

Nick Versaw leads Compare.com's editorial department, where he and his team specialize in crafting helpful, easy-to-understand content about car insurance and other related topics. As an award-winning writer, Nick has seen his work published in countless renowned publications, such as the Washington Post, Los Angeles Times, and U.S. News & World Report. He graduated with Latin honors from Virginia Commonwealth University, where he earned his Bachelor's Degree in Digital Journalism.