A car insurance deductible works similarly to any insurance deductible: You’ll contribute a fixed amount out of pocket before your insurer reaches into its own pocket. Deductibles commonly apply to collision and comprehensive car insurance—and may also apply to personal injury protection (PIP), depending on your state and policy. Many drivers choose a $500 deductible, although available options may range from $100 to $2,000, depending on the insurer.
When selecting auto insurance deductibles, take into account factors like your budget, your driving record, and how much your car is worth. A high deductible can help you save on your monthly premiums, but it will prevent you from filing claims for smaller losses and will lead to more out-of-pocket costs whenever you can file a claim.
ADVERTISEMENT
What is a deductible in car insurance?
Your car insurance deductible is what you are required to contribute toward your own repair, replacement, or medical bills whenever you file certain types of car insurance claims. For example, suppose you have a $1,000 collision insurance deductible. If you cause $4,000 worth of damage to your car in an accident, then you’ll be responsible for covering $1,000 worth of repairs, and your insurance payout will be $3,000.
How do deductibles work with car insurance?
By agreeing to pay your car insurance deductible, you share a portion of the financial risk with your insurance company in the event of a car accident or some other covered loss. Here’s a real-world example of how car insurance deductibles work after a crash:
- You accidentally drive into a ditch and roll your vehicle, causing significant damage to your car.
- You record the details of the crash, submit relevant information to your insurance company, and file a claim on your full coverage car insurance.
- Your insurer assesses the damage and pays out the amount it would cost to fix your car—minus your deductible.
- You use your insurance settlement to cover a portion of the repair bill.
- You pay your deductible out of pocket to cover the remainder of the repair costs.
Which types of car insurance have deductibles?
Generally, a deductible will apply whenever you file a claim on any of the following types of car insurance:
Conversely, you typically won’t have to worry about paying a deductible anytime you file a claim on your liability insurance, medical payments coverage (MedPay), or uninsured motorist bodily injury coverage. In addition, you may not have to pay a deductible for glass replacement claims after your windshield or windows are damaged, depending on your state and insurance company.
How much are car insurance deductibles?
Auto insurance deductible options may range from as low as $100 per claim to as high as $2,000 per claim, with $500 being one of the most commonly chosen deductible amounts. Keep in mind that you’re usually free to pick your deductible from among the options offered by your insurer, meaning you can select a higher or lower deductible based on your specific coverage needs.
The car insurance deductible you choose often directly affects your premiums. When you pick a higher deductible, you agree to cover more of the costs out of pocket whenever you experience a covered loss, so your insurance company charges you less for coverage. Conversely, the insurer shoulders more of the risk when you have a low deductible, resulting in higher premiums.
$500 vs. $1,000 car insurance deductible: Which is better?
Whether a $500 or $1,000 deductible is preferable depends on factors like your driving record, risk tolerance, and budget. A $1,000 deductible may be appealing because it will help you save on your premiums—but if you don’t have very much money in savings, it may be easier to budget for a $500 deductible with higher monthly premium payments.
Meanwhile, a higher deductible may make sense if you have a clean driving record and trust your ability to avoid filing many claims, since you’ll reap the benefit of lower premiums without having to worry about the increased deductible amount very often. On the other hand, if you live in a high-risk region or have a poor driving record, it may be safer to opt for a lower deductible so more of your expenses will be covered if you get into multiple accidents.
How much can raising your deductible save?
If you begin with a $200 deductible on your comprehensive or collision insurance, you could lower the cost of that policy by 15%–30% by increasing your deductible to $500—or by more than 40% by raising the deductible to $1,000. Ultimately, your premiums may also be influenced by a variety of other factors, such as your location, mileage, and personal details.
High-deductible car insurance vs. low-deductible car insurance
As a review, here are the main benefits and drawbacks to consider when deciding whether you want to choose a high or low deductible for your car insurance policy:
When do you pay a car insurance deductible?
Technically, you don’t usually pay your car insurance deductible until after your vehicle is repaired following a covered accident. Instead of submitting a deductible payment directly to your insurance company, you’ll generally receive an insurance settlement with the deductible amount automatically subtracted. As a result, you “pay your deductible” to the auto shop when you cover the difference between your insurance check and your repair bill out of pocket.
Do you pay a deductible every time you file a claim?
A car insurance deductible generally applies each time you file an eligible claim under coverage that carries a deductible. For example, if your car is damaged in two separate collisions and you file a collision claim for each loss, your collision deductible would generally apply separately to both claims.
If the cost of a covered loss is less than your deductible, your insurer generally won’t make a payment for that loss. For example, if you have a $1,000 collision deductible and covered repairs cost $750, the repair bill falls below your deductible, leaving you responsible for the full $750.
Can you change your car insurance deductible?
Most insurance companies will let you adjust your car insurance deductible at any point during the coverage period, though some may instead require you to wait until your policy comes up for renewal. Regardless of when you change your auto insurance policy’s deductibles, remember that your premiums may go up or down accordingly.
Car insurance deductibles at a glance
- Definition: A car insurance deductible is the money you must pay out of pocket before your auto insurance coverage takes effect. If the cost of repairs is lower than your deductible, then your policy won’t provide any coverage.
- Applicable coverages: Deductibles don’t apply to every type of auto insurance, but you can generally expect to pay a deductible when you file a claim on your collision coverage, comprehensive coverage, uninsured motorist property damage coverage, or personal injury protection.
- Cost: Most drivers opt for a $500 car insurance deductible, but you may be able to set your deductible anywhere from $100 to $2,000, depending on what fits best within your budget.
- Effect on premiums: Since a high deductible means you’re shouldering more of the financial risk in the event of an accident, higher deductibles generally correspond to lower premiums. You could potentially save over 40% on certain auto insurance policies by selecting a higher deductible.
- Considerations: The right deductible for your situation may depend on factors like how much money you have in the bank, how often you drive, and whether you have a poor driving record or are otherwise especially likely to file claims.
- How it works: You don’t need to pay your deductible directly to your insurance carrier, as your chosen deductible amount is instead deducted from your insurance settlement automatically.
ADVERTISEMENT
How to choose the right car insurance deductible
You’ll need to balance your monthly premium payments with the amount you can afford to pay out of pocket in case of an unexpected accident or event to figure out the best deductible for your circumstances. Before picking your deductible, keep the following factors in mind:
- Budget: If you have plenty of money in your bank account, you can likely afford to opt for a higher deductible. Otherwise, it might be safer to choose a lower deductible and work slightly higher premium payments into your monthly budget.
- Car value: Older vehicles generally have a lower actual cash value—which is the amount your insurer will pay out if your car is totaled. As a result, if you have a low-value vehicle, a high deductible may not make sense, since you aren’t expecting a very large payout in the event of a total loss anyway.
- Risk exposure: The more often you file car insurance claims, the more likely you are to benefit from a lower deductible. For this reason, someone who has a lackluster driving record or lives in an area with a high rate of accidents, car thefts, or uninsured drivers may want to consider lowering their deductible.
- Risk tolerance: At the end of the day, insurance is a risk-sharing contract, and your deductible is one of the main ways you split the risks with your insurance company. If you have a high degree of risk tolerance, you may be willing to bet on your ability to drive safely and pick a higher deductible. Alternatively, if you have a lower risk tolerance, you may prefer to trade a predictable increase in your premiums for a lower deductible.
Another way to directly determine the impact of deductibles on your premiums is to request multiple car insurance quotes with different deductible amounts. Each insurer uses its own distinct underwriting guidelines, so you’ll also want to collect quotes from three to five different insurance providers to make sure you’re getting the best possible deal on the car insurance you need.
The takeaway
A car insurance deductible is a necessary evil to reap the benefits of your insurance policy. The money is simply deducted from your payout after a qualifying event. Liability, MedPay, and uninsured motorist bodily injury coverage don’t require a deductible—but most other coverages do.
You can typically opt for either a high or low deductible, which affects your monthly premium. A higher deductible tends to be better for those that want the lowest monthly payment and have confidence that they’ll rarely be filing a report. Just be sure to consider how risky your area is, your past driving record, and the value of your car when selecting your deductible.
Frequently asked questions
Do you have to pay your deductible if you’re not at fault?
If another driver is at fault for an accident that injures you or damages your vehicle, their liability insurance should cover your expenses, meaning you may not have to file a claim on your own policy or pay a deductible. However, you likely will have to pay a deductible if you file a claim on your own collision, comprehensive, PIP, or uninsured motorist property damage coverage, even if you’re not at fault.
What happens if your car repairs cost less than your deductible?
If your car repairs cost less than your deductible, then your car insurance company won’t contribute anything toward your repair bill and there’s no reason to file a claim.
Do you pay your deductible directly to your insurance company?
No, you don’t pay your deductible directly to your car insurance company. Instead, as its name suggests, the deductible is automatically deducted from your insurance payout.
Is car insurance tax deductible?
Car insurance premiums are only tax deductible if you use your vehicle for business purposes.
Should you raise your deductible to lower your car insurance premium?
Raising your deductible to lower your car insurance premium may make sense if you are a responsible driver, have a significant amount of money in savings, or are willing to risk high out-of-pocket costs in the event of an unexpected accident to lower your regular insurance bills.