Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate auto insurance products to write unbiased product reviews.
- A car insurance deductible is the amount you’ll have to pay out-of-pocket before coverage kicks in.
- Choosing a high deductible will lower premiums, and a low deductible will raise your premiums.
- If you anticipate you’ll need to file a claim, you may want to opt for a lower deductible.
When it comes to buying car insurance, getting lost in the never-ending jargon is easy. Your goal is to pick the best auto insurance. To do that, you need to understand the key factors in any car insurance policy, including the deductible.
Car insurance is meant to decrease your expenses in the case of emergency repairs. Choosing the right deductible can help you do that.
Understanding Car Insurance Deductibles
Definition of a Car Insurance Deductible
A car insurance deductible is the out-of-pocket amount you have to pay to repair or replace your vehicle, even after filing a claim with the car insurance company. You’ll have to pay a deductible with most types of car insurance coverage, including comprehensive coverage and collision coverage.
How Deductibles Work in Car Insurance Policies
Each car insurance policy has a stated deductible, which is the out-of-pocket amount you’ll have to pay whenever you file a claim.
Here’s an example provided by car insurance expert Sondra Colvin, Director of Product at The General, “with a $500 deductible and $2,000 in repairs, you would pay $500, and your insurance would cover the remaining $1,500, subject to your policy. If the cost of repairs exceeds your car’s value, it may be considered ‘totaled,’ and your deductible would be subtracted from the payout.”
On the other hand, if a repair costs less than the car insurance deductible, you’ll have to pay the entire cost of the repair.
Another way to think of deductibles is that they represent the maximum amount of money you could pay when your car is damaged in a manner covered by your insurance. So if your deductible is $500, you can rest assured that the most you’ll have to pay for a repair is $500 (as long as your insurance covers the incident).
Types of Car Insurance Deductibles (Collision vs. Comprehensive)
There are two main types of car insurance coverage: collision coverage and comprehensive coverage. Most auto insurance policies include one or both of these coverage categories, and each category has its own deductible.
Collision Deductible
Collision coverage will help you pay for repairs when your car collides with an object, a building, or another vehicle — and the collision is your fault. The collision deductible is the amount you’ll have to pay out of pocket for repairs if you ever cause a collision.
Comprehensive Deductible
Comprehensive coverage helps pay for repairs caused by non-collision incidents, including theft, fire, rocks, falling trees, vandalism, and animal strikes. If you file a claim for repairs covered under the comprehensive portion of your insurance policy, you’ll be responsible for paying up to the comprehensive deductible.
How to Choose the Right Deductible
Choosing the right deductible is an important decision that will significantly impact how your insurance works for you.
Generally, choosing a higher car insurance deductible will lower the cost of your premium. Likewise, choosing a lower deductible will result in a higher premium. While it can be tempting to choose the highest deductible to lower your monthly premium, you should choose a deductible amount that you’ll realistically be able to pay should you ever need to file a claim.
Factors to Consider When Selecting a Deductible
- Do you want to prioritize low payments or minimize the cost of repairs?
- How risky is your driving environment?
- Do you have a car loan? If so, does the lender have a car insurance deductible requirement?
High vs. Low Deductible: Which is Better for You?
Picking a deductible requires taking a careful look at both your driving habits and your financial situation.
A low car insurance deductible is better if you think it’s relatively likely you’ll have to file a claim — which is often the case in urban areas or regions with severe winter weather. You should also choose a low deductible if you think you can budget for higher premium costs, but worry that you’d be unable to meet a sudden drastic expense.
A high car insurance deductible could be the better option if you think it’s unlikely you’ll have to file a claim. For example, you could be someone who rarely drives and keeps their vehicle safe in a garage. In that case, you could reduce the cost of your premium by opting for a higher deductible, knowing you’ll likely never pay for covered repairs, anyway.
Impact of Deductible on Premium Costs
There is an inverse relationship between deductibles and premium costs. In other words, higher deductibles come with lower premiums, and lower deductibles bring higher premiums. Sondra Colvin reminds drivers to, “compare your options to strike the right balance between savings and adequate protection.” The exact impact of the deductible on your auto insurance premium varies by insurance provider.
How Deductibles Affect Claims
What Happens When You File a Claim?
If your vehicle is damaged in a way that’s covered by your insurance policy, your first step is to file a claim. This is where you tell the insurance company what happened. The insurer will then decide whether to approve your claim. During this stage, you might be asked to get a cost estimate for the repairs from a mechanic.
The claims process can take days or weeks, depending on the circumstances.
Assuming the claim is approved, you can go ahead and have the car fixed — and the insurance company will pay the price of the repairs, minus the deductible.
Real-World Examples of Deductible Application
Imagine a tree falls on your car, requiring $3,000 in repairs, and you have a $800 comprehensive deductible. You’ll be required to pay $800 towards the repairs, and the insurance company will cover the remaining $2,200. Some insurers will pay this money directly to the repair shop, while others will send you a check.
If the cost of the repair is less than your deductible, you’ll have to pay for the entire repair. In these cases, it’s often best not to file a claim because filing claims may increase your premium.
Situations Where Your Deductible Might Not Apply
Here are cases where you might not have to pay your deductible:
- Another driver was at fault in the accident, and you have a Collision Deductible Waiver (CDW).
- Your policy includes Full-Glass coverage, and the repairs are all glass-related.
- Your policy has a Vanishing Deductible that disappears after a certain period of incident-free driving.
- Your insurance covers the damage or injuries you caused to another person (through your policy’s liability coverage).
Pros and Cons of High and Low Deductibles
Advantages of a High Deductible
- Your premium will be lower.
- You’ll come out ahead if you never file a claim.
Drawbacks of a High Deductible
- You’ll face higher out-of-pocket costs if you file a claim.
- Emergency auto repairs could cause acute financial stress (because you’ll have to foot more of the bill).
Advantages of a Low Deductible
- When you file a claim, you won’t have to pay as much for repairs.
- You’ll limit the financial stress of emergency expenses (as long as they’re covered in your policy).
Drawbacks of a Low Deductible
- Your premium will be higher.
- If you never file a claim, you’ll have paid more for insurance unnecessarily.
Comparing Deductibles Across Different Car Insurance Providers
When you sign up for car insurance, you can typically choose from a list of deductible options, and you should be able to see how each option would affect your premium. Most car insurance providers offer deductibles in the range of $250 to $2,000, but exact options vary by company.
Some companies also offer unique deductible options. For example, Nationwide, and other providers offer a Vanishing Deductible that decreases with each year of safe, incident-free driving. Liberty Mutual offers a Deductible Fund, where you and the insurer contribute to a fund that can later be used to lower your deductible. Before signing up for car insurance, consider whether any of these alternative options are right for your situation.
Understanding Deductible Waivers and Discounts
Some insurance providers offer a Collision Deductible Waiver (CDW) option to accompany collision coverage. This waiver helps you avoid paying the collision deduction if you’re in an accident where another driver is at fault.
Imagine having your car hit by another driver. If you have standard collision coverage, you’ll have to pay the collision deductible to repair your vehicle, and the insurance company will cover the rest. Meanwhile, with a CDW, the provider will cover the entire cost of repairs.
Car Insurance Deductibles FAQ
Car insurance deductibles typically range from $250 to $2,000. Within that range, a $500 deductible is most common.
Yes, a higher car insurance deductible typically results in a lower premium.
You might not have to pay a deductible if another driver was at fault for the accident (and you have a Collision Deductible Waiver), if the damage is limited to glass and you have Full-Glass coverage, or if you have a Vanishing Deductible that’s already gone down to $0.
Many insurers allow you to change your deductible even after purchasing a policy.
Generally, a higher deductible results in a lower insurance rate, while a lower deductible results in a higher insurance rate.
If you can’t pay your car insurance deductible, the repairs might be delayed until you gather the necessary money. You can also search for a cheaper repair option or ask if the repair shop offers a payment plan.
