Car Insurance Deductibles: What You Should Know

How do you choose the right deductible?

Let’s face it – car insurance is complicated.

There are so many different aspects to consider when it comes to your car insurance policy that. One of them is deductibles. Your car insurance policy has one, but do you know what it is? Or even what it means?

Deductibles are an important tool you can use to manage your insurance costs. If you get into an accident and need to file a claim, you will want to know more about your deductible. It also plays a significant role in determining your bill at the end of the month (or 6 or 12 months, depending on how you have it set up).

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

What is a Deductible?

A deductible on an insurance policy is, to put it simply, the amount you will pay out of pocket if you file a claim. Deductibles are commonly found in many insurance policies, including auto and homeowner’s policies. They’re also generally specific to each occurrence, meaning that if you need to file two separate claims, you’ll have to pay your deductible twice.

How Do 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 coverages. This means that if you are involved in an accident with another vehicle, your deductible does not apply to their damages. They may have their own deductible, but yours is for your own damages.

When you purchase your auto insurance policy, you will be able to select your deductible. This can be changed at renewal if you decide a different amount would be better for your situation. Common deductibles are $250, $500, or $1,000.

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

If, on the other hand, you selected a $250 deductible and sustained $4,500 in damages, your carrier would pay $4,250. You would only need to pay $250 of the damages.

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 an insurance policy with a $10,000 limit and a $500 deductible, your policy limit is $10,000 once you have paid your $500 deductible. In some types of policies, the deductible is subtracted from your policy limit, so it is important to talk to your agent to better understand your policy.

What Deductible Should I Choose?

You are responsible for paying your deductible should you submit a claim, so be sure you pick a deductible you can afford. You might weigh the likelihood of submitting a claim against the potential savings from a higher deductible to make this decision.

Deductibles for auto insurance 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.

You will select your deductible for each coverage. For example, if you have both comprehensive and collision coverages, you will select a deductible for each. These may be the same amount, but you also may decide to have one higher than the other. Any medical payments or personal injury protection on your auto policy may also have its own deductible, so it’s important to take the total of all relevant deductibles into consideration.

If your vehicle is leased or financed, your lender may 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.

How Does my Deductible Affect the Price of Insurance?

Having a deductible on your insurance policy tends to lower insurance rates. This is because the policyholder is retaining a portion of the risk. If you carry a deductible of $1000, for example, the carrier will never see the smaller damages like a dent from a stray shopping cart or scratch from the teenaged driver coming too close to the garage door.

In general, electing a lower deductible means the insurance company has a higher likelihood of paying out for a claim. Therefore, your rate will be higher. A lower deductible does the opposite – by reducing the frequency of losses your carrier pays, you pay less each month.

To put it simply:

  • High 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.

Can I Get An Auto Insurance Policy With No Deductible?

Many carriers offer auto insurance policies with no deductible. If this is something that interests you, you can compare your options and shop around for zero-deductible plans to find the best option for your situation. Remember that your premium will likely be higher for a zero-deductible policy, so shopping around can help you find the best deal.

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 are getting your vehicle fixed, you will usually pay the deductible to your body shop or mechanic. This way, your body shop will be paid in full between your deductible payment plus the cost of repairs paid by your carrier.

If you are not going to repair the damages to your vehicle, you will not 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 with no contribution from your carrier, as it will be paid from your deductible.

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 one 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.

For carriers that offer disappearing deductibles, they often set aside $50 each year into this 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:

If you do 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 will charge extra for disappearing deductibles, so you may need to weigh the cost of this benefit against your likelihood of using it before you decide to add 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 to your insurance company. 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.

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 the Premium Savings Worth Having a Higher Deductible?

This depends on your unique 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 are getting the best rate as you adjust your deductible. Your best option is to compare as many companies as possible, side-by-side, with a site like

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