What is a car insurance deductible and how does it work?
A car insurance deductible is an amount that you have to pay on your own before your car insurance company covers any claims. The average car insurance deductible for comprehensive and collision coverage is $500 (for each policy). You are responsible for paying your deductible every time you file a claim with your insurance company. However, you can choose a lower or higher car insurance deductible based on how much you can afford to pay out-of-pocket.
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UPDATED: Jan 24, 2022
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- A car insurance deductible is an amount that you have to pay on your own before your insurance company pays any claims
- Collision and comprehensive car insurance policies, along with a few others, have car insurance deductibles that are agreed upon by the policyholder and insurance company
- The policyholder is responsible for paying the deductible every time they file a claim
- The higher your deductible, the lower your car insurance rates, and vice versa
What does deductible mean in car insurance? If you’re not familiar with car insurance policies, you may not have a deep understanding of deductibles and how they work. Fortunately, deductibles are a pretty simple concept.
Read more below about car insurance deductibles and to find a simple car insurance deductible meaning.
If you’re looking for an affordable car insurance deductible, enter your ZIP code into our free quote comparison tool above.
What is a car insurance deductible?
What is a deductible in car insurance? A car insurance deductible explained simply is the amount you will have to pay on your own before your insurance company pays for any claims. For example, if you have a $500 deductible and a claim for $1,000, you will have to pay the first $500 before your insurance company covers the remainder.
Collision and comprehensive car insurance are the most common policies with a deductible. Collision car insurance will cover damage to your vehicle if you are in an accident. A collision deductible is typically $500, but it can vary between $100 and $1,000 depending on your insurance company and location.
Comprehensive policies cover damage to your vehicle for incidents other than an accident, such as theft or natural disasters. Comprehensive deductibles are also typically around $500.
Other policies that may have deductibles include personal injury protection (PIP), uninsured motorist property damage coverage, and mechanical breakdown insurance.
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How does a car insurance deductible work?
Car insurance policies have deductibles to ensure that policyholders don’t file claims for silly reasons. In most cases, if you file a claim with your car insurance company, the company will write a check for your claim amount less your deductible.
Car insurance deductibles differ from other insurance deductibles regarding how often you must pay them. For example, when do you pay the deductible for car insurance? Every time you file a claim, you are responsible for paying your deductible. This is different from health insurance, where you pay your deductible annually.
If your deductible is higher than what you need to pay for repairs to your vehicle, there is no point in filing a claim since you will be responsible for paying for the total amount out-of-pocket.
If you cause an accident that results in any car insurance claims on policies that require a deductible, you will be responsible for paying the deductible. This could include using PIP insurance for your injuries, using collision or comprehensive coverage for damage to your vehicle, or when you share fault with another driver and use your own insurance.
However, if another driver hits you, their insurance should cover your damages without you paying a deductible. If you choose to file a claim through your collision coverage, you will have to pay your deductible but then be reimbursed when your insurance company files a subrogation claim with the at-fault driver’s insurance company.
How do deductibles affect car insurance rates?
Generally, the higher your deductible, the lower your car insurance rates. So let’s take a look at the difference between car insurance rates with different deductibles:
|Deductible Amount||Monthly Car Insurance Rate||Cost Difference|
|$250||$182||27% lower than $100 deductible|
|$500||$129||29% lower than $250 deductible|
|$1,000||$89||31% lower than $500 deductible|
|$2,000||$84||6% lower than $1,000 deductible|
As you can tell, having a higher deductible means you will generally pay a decent amount less than if you chose a smaller deductible. Therefore, increasing your deductible to save on your monthly insurance rates may be worth it. However, increasing your deductible too high may not bring enough value. (You can see that raising your deductible to $2,000 will only save you a few dollars a month.)
Can I choose my deductible?
You can choose your deductible when you buy your car insurance coverage. However, when you consider your options, there are a few different factors that you should consider before you make any decisions.
The most significant factors in choosing your deductible are how much you’re willing to pay out of pocket and how much the deductible will save you in the long run. Consider the following:
- How likely is it that you will file a claim?
- Do you have savings that you could use to pay for damages or repairs?
- How much are you willing to spend out-of-pocket?
- How much is your car worth?
- How much would a higher deductible save you monthly?
- How much would a lower deductible cost you monthly?
- Could you afford multiple deductibles from different coverage types?
- Do you have a loan or lease that requires a specific deductible?
You can think about these on your own, or you could work with an independent insurance agent to get their input about your options.
Enter your ZIP code into our free quote comparison tool below to find policies with an affordable car insurance deductible.