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. Deductibles are one of the most important aspects of auto insurance. Knowing what they are and how they work could save you lots of money.

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

This article will help you better understand auto insurance 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 can affect your rates.

What is a Car Insurance Deductible?

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

Insurance deductibles are all about risk. You and your insurance company both agree to pay a certain amount of money if you need their help. But the amount you pay can affect your rates. The more financial 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 deductible 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 insurance. This type of insurance covers events that are within your control. This includes accidents and collisions with other cars or objects.
  • Comprehensive insurance. 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 deductible amount, your insurance pays the leftover $500.

When to Pay the Deductible

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

If another person’s insurance 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 deductible 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 your deductible each time an event occurs where your insurance 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 your deductible:

  • 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.
  • 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 deductible payment.

High vs. Low Deductibles

There are several factors to consider before deciding on a deductible amount. The great thing about choosing your deductible is, it’s totally up to you. Below are some details to consider before choosing your vehicle insurance 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 that entire $1,000 deductible if you got into an accident.

You may want to check out lower deductible amounts if you can’t afford a higher amount. That’ll help you avoid future financial issues. However, it might be useful to consider higher deductible amounts if you can pay a higher amount, 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 deductible might be better if you’re rarely in accidents. A high deductible could help you save some money on your car insurance. But be aware that you’re taking on more financial risk with a higher deductible.

How Much is Your Car Worth?

Your car’s value is a big factor in choosing your deductible amount. A high deductible 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 a deductible 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 car insurance 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. If you consider yourself a high-risk driver, you might opt for a lower deductible. This is because you may end up filing claims more frequently. Remember that you must pay your deductible each time you make a claim.

How Deductibles Can 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 collision insurance 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 deductibles 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 a deductible amount. 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

Q: What is a car insurance deductible?

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

Q: Do I pay someone else’s deductible if I hit their car?

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

Q: Should I have a high deductible or a low deductible?

A: 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.

Q: When do I pay the deductible for car insurance?

A: 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.

Q: When don’t I pay my car insurance deductible?

A: 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.

Q: What is zero-deductible insurance?

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

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

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


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