What Is a Car Insurance Deductible?
A car insurance deductible is the amount of money you’ll pay out of pocket for an accident before your insurance company pays the rest. For example, if you file a claim for $1,500 and you have a $500 deductible, you will have to pay the $500 deductible before your insurer will cover the remaining $1,000 balance.
Key Things To Know About Car Insurance Deductibles
- The average car insurance deductible is $500.
- Not every type of car insurance uses a deductible.
- The higher your car insurance deductible is, the lower your car insurance premium will be.
- If you’re at-fault in a collision, you can’t avoid paying your deductible.
- Most drivers pay a deductible when they’re not at fault, but there are some exceptions.
Car insurance deductibles work the same way for all coverage types, and you will get to choose your deductible amount for each. For example, you could choose a $500 deductible for comprehensive insurance, which tends to have lower premiums, but $1,000 for collision, which usually costs more. Many people also choose a separate deductible for windshield repair or replacement, which can have deductible options as low as $0.
Not all types of car insurance coverage apply a deductible. Liability insurance, which is required by law in almost every U.S. state, never uses a deductible. Liability insurance covers damages you cause to another person or their property in an accident.
Collision and comprehensive insurance are the most common coverage types that use deductibles. Collision insurance covers your car from accidents, no matter who is at fault. Comprehensive insurance covers damage from events outside of your control, like fires, floods, falling objects, and vandalism.
If you have coverage for personal injury protection (PIP) or uninsured/underinsured motorists, these may also carry deductibles. PIP helps cover medical bills for you and other passengers and is required by some states. Uninsured motorist coverage protects you in the event you are hit by a driver who doesn’t have insurance, or whose coverage limits can’t cover the full amount of damage caused.
|Deductible||Monthly Premium||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|
Note: Rates are for a six-month collision coverage policy, per Progessive.com.
As you can see, increasing the deductible lowers the premium. But notice how little you would be saving by jumping from a $1,000 to $2,000 deductible—just 6%. The extra $5 each month in your pocket is almost certainly not worth paying an extra $1,000 out of pocket after an accident.
On the other hand, picking a $1,000 deductible over $500 would save you $40 each month, according to these sample numbers. Over the course of the six-month premium, you would save $240 with the higher deductible ($40 x 6 months = $240). That’s about half of the extra $500 you would have pay out of pocket with the higher deductible after an accident, so the $1,000 deductible policy may be a better value. This is especially true if you are a safe driver with very few claims and/or tend to be a person who manages and saves money well. The longer you can go without filing a claim, the better the value of the higher deductible policy.
Moral of the story—make sure you’re considering value in addition to cost.
In general, you have to pay your car insurance deductible when fault doesn’t matter or the damage and injuries were the result of an accident that was your fault.
For example, if you cause an accident that damages your vehicle, you will need to file a claim with your insurer using your collision coverage and pay your collision deductible. If you’re injured and you have PIP, your coverage will pay for your medical expenses and require a deductible.
You will also need to pay your deductible in cases where fault is negligible. If a tree falls on your car and you file a claim through your comprehensive coverage, you will still have to pay your deductible even though you technically weren’t at fault. This can also apply to medical bills.
In no-fault states, your insurance company is required to pay for your medical expenses after an accident, regardless of who is at fault. These states usually require drivers to carry PIP coverage, so you would have to pay your PIP deductible. You would only be able to recover expenses from the other driver if your costs exceed a certain amount or you’re seriously injured.
In most cases, you do not have to pay your deductible if another insured driver hits you. The other driver’s liability insurance should pay for your repairs. If you have collision coverage, you can choose to go through your insurance to repair your car, but you still won’t have to pay the deductible. Your insurance company will seek full reimbursement from the at-fault driver’s insurer.
However, if your damages exceed the other driver’s policy limits and you decide to use your insurance as secondary coverage, your deductible may apply. It will also apply to uninsured/underinsured motorist coverage, if you have it. In both cases, it might be possible recover your expenses in civil court.
If another person files a claim against you, your liability coverage will cover the costs of repairs. You will not pay a deductible to cover damages to the other party. But you will have to pay a deductible to get your own car fixed when you are at-fault. You can also expect to pay all or part of your deductible in situations where fault is shared between you and the other driver. You may be on the hook for any damage you cause that exceeds your policy limits, too.
If you’re at-fault for a collision, there’s not much you can do to get out of your deductible, or even to reduce the cost. You could ask the mechanic to bill the insurance company, minus the cost of your deductible, and set up a payment plan for the balance. But mechanics can legally keep your car until the debt is repaid. Or, you could ask the mechanic to bill your insurance company and waive the deductible, as a condition of getting your business. Since repair bills can be high, the mechanic may waive a $250 or $500 deductible in order to get the job. But it’s not likely. It’s also illegal for the mechanic to overcharge your insurance company to compensate for waiving your deductible.
Another reason you’re unlikely to avoid paying your deductible is that most car insurance companies simply subtract the cost from your claim. If your mechanic bills $3,000 in repairs and you have a $500 deductible, your insurer will write a check for $2,500 to cover it. Some companies will pay the mechanic directly, and others will write you a check to pay for the repairs yourself. Either way, they’ll subtract your deductible before processing the claim.
This is why it’s important to set aside the money for your car insurance deductible before something happens, especially if you go with a higher one. Put the cash in an interest-earning account. That way you’ll have the money handy if you need it, and you can earn a little extra in the meantime.
Nevertheless, certain car insurance terminology can understandably lead to some confusion regarding a policyholder’s deductible-payment obligations. That’s especially true when it comes to “fault” and “deductible waivers.”
1. A deductible is what you’ll pay out of pocket before your insurer pays the rest of a claim.
If you have a $500 deductible and a claim for $2,500, your insurance company will pay $2,000 of the cost. Your insurance company will not pay bills that are less than your deductible, and they won’t cover any costs until your deductible is paid.
2. You choose your own deductible for each type of coverage.
If you’re purchasing both collision and comprehensive coverage, you could choose a $1,000 deductible for one and a $500 one for the other. Keep in mind that the higher your deductible is, the cheaper your premium will be.
3. Fault matters when it comes to paying your deductible after an accident.
In most cases, you do not have to pay your deductible if another insured driver hits you. But you may have to pay it if fault is shared, and you’ll have to pay it to repair your own car if you have an at-fault accident. You’ll also have to pay if your vehicle is damaged by something other than an accident or if you’re injured by an accident in a no-fault state .
4. You probably can’t get around paying your deductible after an accident.
If you can’t pay your deductible, you’ll have to ask your mechanic for a payment plan or put the cost on a credit card. No matter what, your insurance company will not pay for it.
5. Compare rates with different deductibles to get the best deal.
Higher deductibles mean lower premiums, but that may not be the best bang for your buck. It’s worth it to check your rate with different deductibles, because the potential savings from raising your deductible could be outweighed by how much more you would have to pay out of pocket after an accident.
Choosing a higher deductible can help you save on insurance premiums, but it’s not the only way to lower the bill. Most insurance companies offer a wide variety of discounts, like paid-in-full, safe driver, bundling, low annual mileage, long-time customer, multiple vehicles, and more. You can also reduce coverage in other ways, like lowering your policy limits or skipping roadside assistance and rental car coverage.
In the end, your car insurance doesn’t do you much good if you can’t afford to pay your deductible. The temptation to keep premiums as low as possible can be strong, but you may end up compromising value if that’s your only focus.