Car Insurance Deductibles Explained

Last Updated on July 1, 2022

The deductible is one of the most important parts of your car insurance policy.

When you make an insurance claim, you must pay a deductible. You pay a deductible of $250 to $1,500 per claim, and your car insurance company covers all remaining repair costs.  

It’s important for you to understand how car insurance deductibles work. Keep reading to discover everything you need to know about car insurance deductibles. 

What Is a Car Insurance Deductible?

A car insurance deductible is an amount you pay for your insurance claim before car insurance covers the rest.

In other words, your deductible is your “out of pocket” payment. Your car insurance company will cover the entire cost of the accident minus your deductible.

Car insurance deductibles vary based on the type of insurance. 

A comprehensive coverage deductible is around $250 to $500, for example, while a collision coverage deductible might be $500 to $1,500. Some car insurance coverages – like windshield repair claims – have no deductibles. 

How Do Car Insurance Deductibles Work?

You pay a deductible when making a claim on your car insurance policy.

If you collide with another vehicle, for example, or if you roll your car in a single-vehicle accident, then you pay your deductible before your insurance covers all remaining costs.

Here’s how it works:

  • You are driving home in a snowstorm and slide into a tree
  • Your vehicle has $1,500 of damage to the front bumper area
  • You contact your insurance company to make a claim
  • You pay your collision coverage deductible of $500, and your insurer covers all remaining costs ($1,000)

Your deductible goes towards repairing the vehicle. Sometimes, you pay your deductible to the repair shop. In other cases, the car insurance company simply reduces your deductible from their payout after the claim. 

Why Does the Car Insurance Deductible Matter?

When buying car insurance, you can choose between a high or low car insurance deductible.

Some drivers want a low car insurance deductible. They want the peace of mind of knowing they can cover any accident that occurs, even if they pay higher premiums each month.

Other drivers would rather have a high deductible and lower premiums. Some drivers want to pay less per month and take the risk of paying more in a claim, for example.

The lower your deductible, the higher your monthly premiums (your monthly insurance payments) will be, but the less you’ll pay per claim 

The higher your deductible, the lower your monthly premiums will be, but the more you’ll pay per claim 

With some insurers, setting the deductible makes a significant difference. A high deductible can lower premiums by 10% to 20%, for example. Today, however, most insurers only provide small discounts for high deductibles – typically around 3% to 5%.

Car Insurance Deductibles Versus Premiums

When dealing with car insurance, there are two main payments you need to make, including deductibles and premiums.

Premiums: Premiums are the monthly fees you pay to maintain car insurance coverage. Most people pay for car insurance every month. You might pay GEICO $100 per month or $1,200 per year for car insurance, for example. This is your monthly or annual premium. Your car insurance remains active for as long as you pay your premiums.

Deductibles: Deductibles are the out-of-pocket fees you pay for each claim. If you need to make a claim for damage to your vehicle, for example, then you pay a deductible, and insurance covers the rest.

Some drivers go their entire lives without paying a deductible. If you have a claim-free driving record, for example, then you’ll never pay a deductible. However, all drivers pay premiums.  

Types of Car Insurance Deductibles

There are different types of car insurance deductibles for different types of insurance. You might pay a $1,000 deductible for some accidents, for example, and a $250 deductible for other claims.

The two most common deductibles are comprehensive and collision coverage deductibles:

Collision Coverage Deductibles: Collision coverage is an optional car insurance coverage that protects your own vehicle after an accident where you are at fault. If you crash into someone’s vehicle, for example, and make an insurance claim, then you’ll pay your collision coverage deductible. A typical collision coverage deductible is $500 to $1,000 per claim. 

Comprehensive Coverage Deductibles: Comprehensive coverage is an optional car insurance coverage that protects your own vehicle from damage that occurs outside of an accident. It covers theft, vandalism, collisions with animals, fire damage, and water damage to your vehicle, for example. Comprehensive coverage deductibles tend to be lower than collision coverage deductibles, with average deductibles of $250 to $500.  

Other deductibles may include personal injury protection deductibles and uninsured and underinsured motorist deductibles.  

What Happens If Repairs Cost Less than My Deductible?

In some situations, the cost of repairing your vehicle is less than your deductible.

It may cost $450 to repair a scratch along the side of your vehicle, for example, and your collision coverage deductible is $500.

In this situation, your best option is to pay for car repair costs out of pocket. You should still notify your insurer of the damage, and it may still be worth it to file a claim (or keep a note of the repairs). However, your best option is to avoid making a claim and pay for repairs out of pocket.

Zero Deductible Car Insurance Plans

Some car insurance plans come with a zero deductible option.

In fact, some states require insurers to charge zero deductible on certain repairs.

Or, some insurers offer a “vanishing deductible,” where your deductible drops every year you maintain a safe driving record. After a certain number of years of claim-free driving, you might pay a zero-dollar deductible.

Some of the ways to pay a zero-dollar deductible include:

Choose Zero Deductible Windshield or Glass Coverage: Some insurers offer zero deductible windshield coverage. In exchange for a few extra dollars per month, you pay zero deductible for windshield repairs or replacements. If you live in a state where windshield cracks are common, and you want added protection, then zero deductible windshield coverage may be worth it. 

Live in a State With Mandatory Zero Deductible Windshield Coverage: Three states require insurers to replace windshields without a deductible. If you live in Florida, South Carolina, or Kentucky, then your insurance company must pay for windshield replacement without a deductible, as long as you carry comprehensive coverage. 

Buy a Vanishing Deductible Add-On: Some insurers offer a vanishing deductible or disappearing deductible add-on. You pay a few extra dollars per year, but your deductible decreases each year you go without filing a claim. Your deductible may drop $100 for every 1 year of safe driving, for example. After five years, you would not pay a $500 deductible.

Make a Claim Against Someone Else’s Liability Coverage: After an accident, you make a claim against the at-fault driver’s liability coverage to cover any damage to yourself or your vehicle. If you file a claim against someone else’s liability coverage, or if someone else files a claim against your liability coverage, then you do not pay a deductible. Liability coverage can cover vehicle damage to the not-at-fault driver, medical bills, and other expenses. 

What’s the Best Deductible?

Choosing your car insurance deductible is a personal thing. 

You need to consider your aversion to risk and your budget to set the ideal deductible for your unique needs.

The average car insurance deductible in the United States is $500.

The higher you set your deductible, the less you’ll pay for auto insurance premiums. And, the lower you set your deductible, the higher you’ll pay for auto insurance premiums. 

Some companies offer minimal savings for raising your deductible. You might save $25 per year on car insurance by raising your deductible from $250 to $500. However, if you make a single claim within that 10-year period, then you’ve erased any savings.

You should also consider the actual cash value of your vehicle. An old car may only be worth $2,000, for example, which makes a high deductible pointless. Your car will be declared a total loss after a minor accident, and there are very few situations where it’s worth making a claim. In this case, you may want to lower your deductible or drop full coverage car insurance entirely. 

Consider your budget, your aversion to risk, and other factors to ensure you’re paying the best possible deductible.  

Contact Your Insurer to Adjust Your Deductible At Any Point

Most insurers make it easy to adjust your deductible. Just contact your insurer, ask to adjust your deductible, and make the change.

You cannot adjust your deductible after an accident. If you recently caused an accident and discovered you need to pay a $1,000 deductible, for example, then you cannot lower your deductible for that accident. 

However, you can adjust your deductible for future accidents moving forward. If you want to pay a lower deductible with future claims, or if you want to pay a higher deductible to reduce premiums, then you can make that change instantly by contacting your insurer. 

Final Word on Deductibles

Your deductible plays a crucial role in the car insurance system. You pay your deductible when making a claim.

You can adjust your deductible to meet your needs and budget. The average deductible in the United States is around $500, although some drivers have higher or lower deductibles.

Contact your insurance company to ask about adjusting your deductible. Your insurer can explain the cost savings of raising your deductible, the advantages of lowering your deductible, and anything else you need to know about your deductible.

James Shaffer
James Shaffer James Shaffer is a writer for InsurancePanda.com and a well-seasoned auto insurance industry veteran. He has a deep knowledge of insurance rules and regulations and is passionate about helping drivers save money on auto insurance. He is responsible for researching and writing about anything auto insurance-related. He holds a bachelor's degree from Bentley University and his work has been quoted by NBC News, CNN, and The Washington Post.
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