What is a car insurance deductible?

When shopping for car insurance, you should be aware of two major costs: policy premiums and deductibles.

The policy premium is the amount of money you will pay to an insurance company in exchange for the policy's coverages and features. This is a recurring fee to keep the policy in effect, but it will most likely change at your renewal period based on the company's updated rates and your personal metrics.

A deductible, on the other hand, is the amount you may be required to pay if you have a covered auto insurance claim. There are various coverages that have deductibles, and these coverages have a variety of deductible options.

Choosing a car insurance deductible is a personal decision that may be influenced by your financial situation. When deciding which deductible is best for you, keep the following factors in mind.

What is an insurance deductible?

A car insurance deductible is the sum of money you agree to pay out of pocket for car repairs or replacement following an accident. If you are in an accident that damages your car $5,000 and you have a $500 deductible, the insurance company should pay $4,500 while you are responsible for $500.

Before finalizing your insurance policy, you will review and agree on your insurance deductible amount with the insurance provider. You should, however, be able to change your deductible at any time.

What types of car insurance deductibles are there?

Your auto insurance policy is a collection of various coverages. Some coverages, such as your liability coverage, will compensate the other party for injuries and damages if you cause an accident. However, some coverages, such as comprehensive, collision, personal injury protection, and uninsured motorist property damage, are available to help cover injuries to those in your vehicle as well as damage to your vehicle. These policies may include deductibles or the option to purchase deductibles.

Here are a few examples of coverages that typically include or have the option for a deductible:

Collision deductible

If you collide with something, collision will assist you in repairing your vehicle. That "something" could be a guardrail, a house, another vehicle, or anything else. If you file a claim under collision insurance for damage to your vehicle, your policy's deductible will be applied.

Comprehensive deductible

Comprehensive, on the other hand, is also known as “other-than-collision” coverage and works to fill in the gaps left by collision coverage. Damage to your vehicle can occur outside of collisions, and your comprehensive coverage will generally extend coverage. Vandalism, theft, and weather-related issues are examples of such damage.

While there are many situations in which a deductible may be applicable, there may be times when your comprehensive deductible does not apply. For example, if you have a chip or crack in your windshield, your insurance company may assist you in repairing it with a $0 deductible, or the company may waive the deductible entirely. Some companies even offer $0 comprehensive deductibles, which means that if you filed a claim for any comprehensive damage, you would not have to pay anything.

Uninsured/underinsured motorist property damage deductible

If you are involved in an accident with an uninsured or underinsured driver, you may be able to file a claim under your uninsured/underinsured motorist property damage coverage. This coverage is not available in every state, but in those where it is, it may have a state-mandated deductible amount. When a deductible is required, it is usually low, ranging from $100 to $300.

Personal injury protection

Personal injury protection (PIP) coverage may be included in your policy depending on your state. This coverage contributes to the payment of medical expenses for you and any passengers in your vehicle. It can also help cover expenses such as lost wages or if you require someone to do household tasks after an accident because you are unable to do so yourself. Depending on your state, you may be subject to a deductible if you file a claim under this coverage. Many states with PIP deductibles offer several options, and the deductible you select can affect your premium.

What types of car insurance do not require a deductible?

Most states require liability coverage, which helps cover injuries and property damage for the other party or parties if you are at fault in an accident. When you purchase liability insurance, you will select a specific amount of coverage. These coverage limits represent the most the insurance company will pay the other party for a covered claim. There is no deductible because liability coverage extends to others you injure or damage.

There is generally no deductible if you choose optional coverages such as roadside assistance or rental car reimbursement, though there may be coverage limits and caps on the number of claims you can file for coverage.

What is the average car insurance deductible?

Many drivers have policies with $500 comprehensive and collision deductibles, but other levels are usually available. Most companies offer deductibles of $250, $500, $1,000, or $2,000 as options. Some car insurance companies provide different deductible options, such as a $0 or $100 deductible. It is not uncommon to have a $100 comprehensive deductible but a $500 collision deductible, or a $500 comprehensive deductible and a $1,000 collision deductible.

What you end up with will be determined by how much you budgeted for car insurance each month and how much you can afford to pay out of pocket if you require repairs. In general, the higher your insurance premium, the lower your deductible. When deciding on a deductible, it is critical to consider your overall financial health.

Factors to consider when choosing a car insurance deductible

When deciding on a car insurance deductible, there are several factors to consider. We've covered a few of them here:

Do you want to pay less for car insurance or repairs?

A higher deductible will generally lower your car insurance premium, but you will incur more out-of-pocket expenses if you file a claim for vehicle damage. Some claims may even fall under your deductible, in which case you will be required to pay the entire amount out of pocket. For example, if you back into a tree and cause $350 in damage to your vehicle, and your collision deductible is $1,000, you will have to pay for all repairs out of pocket.

If you choose a lower deductible, your car insurance premium will almost certainly be higher, but you will incur fewer expenses if you file a claim. If your deductible is $100 and you cause $350 in damage by backing into a tree, you will only have to pay your $100 deductible, while your insurance will cover the remaining $250. However, by having a lower deductible, you may end up spending more on your premium while never filing a claim. This is the nature of insurance and an example of the risk that both you and the insurance company are willing to take.

How much can you afford to pay out of pocket?

Before you choose a policy, consider how much you can afford to pay if your car is damaged in an accident. If that amount is $500, you should probably not choose a deductible that is higher than $500. If you do, you may be unable to afford to repair your vehicle if you are at fault and must pay the deductible for repairs.

Does your lender have deductible requirements?

If your vehicle is financed or leased, you will almost certainly need comprehensive and collision coverage. If this is the case, you must select deductibles. Some lenders will allow you to carry a maximum deductible for comprehensive and collision coverage. It is critical to check with the financial institution handling your loan or lease to see if these restrictions apply.

When is it not necessary to pay your car insurance deductible?

There will be times when you do not have to pay your deductible, but these will be few and far between. In most cases, you will not be required to pay your deductible if you:

Another driver is at fault

If another driver hits you and is insured, you should not be responsible for paying a deductible on the claim you file with their insurance company. Your insurance company's deductibles only apply when you file a claim.

If you have a diminishing deductible

Some insurance companies provide a decreasing or vanishing deductible option. If you have this policy feature, the longer you go without an accident, the less you will have to pay for your deductible. Typically, it is a $100 credit applied to your deductible amount for each year of accident-free driving. For example, if you have a $500 collision deductible and do not have an accident for four years, you may be eligible for a $100 discount each year. If you ever needed to file a claim, your deductible would be $100 rather than the original $500. When you use your diminishing deductible, you usually have to wait a certain amount of time before you can use it again. Speak with your insurance company to find out if this feature is available and what the eligibility requirements are.

Frequently asked questions

What does having a $1,000 collision deductible mean?

If you have a $1,000 deductible, you will have to pay $1,000 out of pocket if you have an approved collision claim. For example, if you file a claim for $5,000 in repairs, you will pay $1,000 and the insurance company will pay the remaining $4,000.

Do you pay a deductible if you hit another car?

There are a few different coverages on your policy that may apply if you collide with another vehicle and are at fault for the accident. Your bodily injury liability and property damage liability coverages will pay for the other party's damages, and there is no deductible for these coverages. However, if you have collision coverage and want the insurance company to pay for repairs to your vehicle, you must pay your collision deductible.

Do you pay a deductible if you are not at fault?

This is determined by the circumstances. If the other driver was at fault, their liability coverage should cover your damages, and you should not have to pay a deductible. However, if the other driver is uninsured or underinsured, you may be required to pay a deductible to cover the expenses, depending on how your coverage applies. If you are hit by another driver whose insurance company denies the claim, or if you are involved in a complicated claim that is taking a long time to resolve, you can use your collision coverage to cover your damages. Your insurance company will pay for your damages, minus your deductible, and then request reimbursement from the at-fault company through a process known as subrogation.