What Is a Car Insurance Deductible?

Deductibles are one of the most important parts of car insurance. This article will help you understand how they work so you can save money.
Insurer deciding auto insurance deductible

Car insurance deductibles may sound confusing, but they’re actually very simple. They’re also one of the most important aspects of auto insurance. Knowing more about your auto deductible could save you lots of money.

The deductible you select will affect how much you’ll pay for coverage. And it also determines how much money you’ll have to pay whenever you file a claim with your insurer.

This article will help you better understand deductibles. We’ll explain how they work and when you need to pay them. We’ll also help you decide whether to set a higher or lower deductible, based on your situation. Finally, we’ll discuss how deductibles affect your rates.

Car Insurance Deductible Basics

Deductibles are a key part of the larger picture of auto insurance. They refer to the amount of money you’ll pay for your vehicle’s damages before your coverage kicks in.

Deductibles are all about risk. You and your provider both agree to pay a certain amount of money if you need financial help. But the amount you pay can affect your rates. The more risk you take on, the lower your rates will be. But the less risk you agree to, the more your insurer will charge you for coverage.

For example, you can have lower rates if you have a higher deductible. But this also means you’ll pay more in an emergency. On the other hand, a lower one usually means you’ll pay more for insurance. This is because your insurer carries most of the financial risk if you file a claim.

You’ll typically choose your deductible when you get your insurance policy. You’ll agree on an amount with your insurer that you’ll need to pay whenever you make a claim. You must set your deductible at an amount that you feel you can pay if you need to file.

How Deductibles Work

Deductibles in car insurance work only with two types of coverages:

  • Collision (part of full coverage). This type covers events that are within your control. This includes accidents and collisions with other cars or objects.
  • Comprehensive (part of full coverage). This coverage protects you from events that are out of your control like theft, falling trees, or natural disasters.

Auto deductibles exist in any case where your vehicle may sustain damages. Keep in mind that liability insurance doesn’t have a deductible. This is because liability insurance only covers physical injuries and damages to other people’s property.

For instance, let’s assume you have a deductible of $500. If you get into a car accident where the repairs total $1,000, you’ll have to pay $500. After you’ve paid your owed amount, your carrier pays the leftover $500.

When to Pay the Deductible

Your deductible only applies if your car has taken damage. It doesn’t apply to another person’s vehicle. According to Progressive, you must pay any time your provider pays for damages.

If another person’s insurer pays for your repairs because they’re at fault for an accident, they must pay the deductible. Sometimes, though, it can be difficult to prove who’s at fault in the accident. In this case, you may want your vehicle fixed right away and pay your deductible for a quick repair.

What can follow is a process known as subrogation. This happens when your insurance company files a claim with the insurance company of the driver who’s at fault. If this is the case, you’ll receive full reimbursement for your payment.

The Insurance Information Institute (III) says “that with auto insurance…the deductible applies each time you file a claim.” This means that it’s not a recurring payment. You must pay each time an event occurs where your company must pay for repairs.

When You Don’t Have to Pay the Deductible

There are a couple of common instances where you don’t need to pay:

  • Someone else hits you. This requires your insurance provider to find out who’s at fault. But know that deciding who’s at fault may not be a short process. Keep in mind that if it’s a hit-and-run, you will need to pay a deductible.
  • You decide not to fix your car. In this situation, you might decide to live with the damages. Sometimes the dent might not be worth all the trouble. Or you could just tape your window up and move on. This case doesn’t require a payment.
  • Your windshield needs repair and not replacement. Most carriers waive your deductible for simple windshield repairs, like fixing rock chips. Windshield replacement requires a deductible.
  • You have full glass coverage. Most comprehensive claims carry a deductible. However, if you’re lucky enough to have full glass as an add-on, you won’t have a deductible for windshield repairs and replacement.
  • You live in a “zero-deductible” state. Everyone in Florida, Kentucky, and North Carolina enjoys the advantages of full replacement coverage for free.

When You Shouldn’t Pay the Deductible

There are times when you absolutely should not pay a deductible, even if you’ve been in an accident. It doesn’t happen much with the cost of modern vehicles and high repair costs, but you could get into an accident and suffer only minor damage to your car. When the cost to repair the damage is less than your deductible, it would be silly to file a claim. You’d end up paying more than if you’d just paid out of pocket.

High vs. Low Deductibles

There are several factors to consider before deciding on a deductible amount. The great thing about choosing your amount is, it’s totally up to you. Below are some details to consider before choosing your deductible amount:

How Much Can You Pay in an Accident?

It’s important to consider how much money you can part with for an emergency. Deductibles can be as high as $1,000. You’d have to pay the entire $1,000 if you got into an accident.

You may want to check out lower amounts if you can’t afford the higher end. That’ll help you avoid future financial issues. However, it might be useful to consider higher amounts if you can pay it, as this will lower your monthly premium.

Do You Have Accidents Regularly?

Something else to consider is how often you have accidents. It might be better to have a lower deductible if you get in lots of accidents. This is because you won’t have to pay as much each time you file a claim.

On the other hand, a higher amount might be better if you’re rarely in accidents. It could also help you save some money on your car insurance. But be aware that you’re taking on more financial risk.

How Much Is Your Car Worth?

Your car’s value is a big factor in choosing your deductible. A high amount wouldn’t make sense if your car isn’t worth all that much. Any repairs could be a similar amount to the worth of your vehicle. It wouldn’t be right to pay one that totals more than it costs to repair your vehicle.

More expensive cars usually cost more to insure. If you own an expensive vehicle, you might save more by having a high deductible.

Overall Risk Factor

Choosing your auto deductible is an important choice. Many factors should go into your decision. But, in the end, it truly comes down to how risky of a driver you are.

You can consider your risk factor by asking some questions about yourself as a driver:

  • When you drive – Do you drive in rush hour or other risky times?
  • New driversDo you have any new drivers or kids on your policy?
  • Where you drive – Do you drive on busy roads or highways often?

These are just a few questions to ask yourself when figuring out your risk as a driver. Drivers with high-risk policies might opt for a lower deductible. This is because you may end up filing claims more frequently. Remember that you must pay each time you make a claim.

How Deductibles Affect Your Car Insurance Rates

Having a higher deductible means you’ll have a lower rate. It’s also true that if you have a lower deductible, you’ll have a higher rate. Below is a table from Progressive depicting how changing your collision deductible can affect your price.

DeductibleCost every six months
$250$300 (29% lower)
$500$225 (25% lower)
$1,000$162 (28% lower)
$2,000$135 (17% lower)

The table above shows that lower amounts significantly raise your monthly rates. It also illustrates that it could be more financially beneficial in the long run if you can afford a higher deductible. But this is just an example. Get a quote and compare rates to find how much changing your deductible moves the needle on your insurance costs.

Zero-Deductible Car Insurance

Zero-deductible car insurance means that you’d pay nothing out-of-pocket any time you file a claim. As an example, let’s say you have collision insurance with a zero-deductible. If you file a claim with $1,000 in damages to your vehicle, you wouldn’t have to pay. Your insurance company would pay the entire $1,000.

Cost of Zero-Deductible Insurance

Zero-deductible insurance is much more expensive than a standard policy. As mentioned, lower deductibles result in significantly higher monthly rates. Having zero-deductible coverage places all the risk on your insurance provider’s shoulders. They’ll assume that risk with higher prices.

Frequently Asked Questions

What is a deductible in car insurance?

A deductible is an amount you’ll pay out-of-pocket each time you file a claim with your insurer.

Do I pay someone else’s deductible if I am at fault in a car accident?

If you’re at fault in an accident, then yes, you’ll have to pay someone else’s deductible. Depending on that person’s amount, it could be anywhere from $100 to $2,000.

Should I have a high deductible or a low deductible?

It’s completely up to you whether to choose a high or low deductible. But it depends heavily on your financial situation. Before deciding, you should look at various factors including risk, financial stability, and even your car’s value.

When do I pay the deductible for car insurance?

Your auto insurance deductible will apply if you sustain damages to your car. You must pay your deductible every time you decide to file a claim.

When don’t I pay my car insurance deductible?

You don’t have to pay your deductible in a couple of situations. The first is if you’re not at fault for the accident. The second is if you simply decide not to file a claim because the damages aren’t worth the trouble or money.

What is zero-deductible insurance?

Zero-deductible insurance is a type of coverage where you don’t have to pay when you file a claim. This type of coverage comes with higher prices, like all other lower deductibles.

Do I pay my deductible on a hit-and-run?

Yes, per Allstate, you must pay on a hit-and-run, regarding vehicle damage. This is true “even if the accident wasn’t your fault.”


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