Car Insurance Deductible

A good deductible for auto insurance is an amount that the policyholder can afford after an accident or unexpected event. The most common auto insurance deductibles are $500 and $1,000, but drivers should take several factors into account before deciding which amount is right for them. These include what premium they can afford and how likely they are to file a claim.  

Since policies with a lower deductible cost more, it can be tempting to choose a high deductible. But your deductible shouldn't be more than you can comfortably afford to pay out of pocket if your car is damaged. If your deductible is too high, you could be putting yourself in a difficult financial position down the road.

You can choose different deductibles for separate types of coverage, so you should consider how likely you are to file each type of claim. For example, if you live an in an area that is prone to natural disasters, consider getting a comprehensive insurance policy with a low deductible. Similarly, if you've never had an accident and you live in a low-traffic area, consider choosing a high-deductible for your collision insurance policy.

Every driver's financial situation is different, so there is no such thing as a one-size-fits-all deductible. To learn more, check out WalletHub's guide to car insurance deductibles.

Car insurance deductibles work as a prerequisite for filing certain types of claims, ensuring that policyholders do not file frivolous claims by forcing them to pay a portion of the cost up front. Policyholders agree to pay the deductible amount before the insurance company will pay for the rest of the claim. Car insurance deductibles work the same way for every type of car insurance coverage including collision and comprehensive, and they are very similar to deductibles for health insurance, homeowners insurance, and business insurance.

For example, if you file a claim for $1,500 and you have a $500 deductible, your insurer will only pay out $1,000. However, if the total cost of damage after an accident is less than your deductible, you'll have to pay for all of it out of pocket.

The average car insurance deductible amount is $500, though deductibles can range from $100 to $2,000.

How Car Insurance Deductibles and Premiums Work Together

The higher the car insurance deductible you choose, the lower your premiums will generally be. While you can consider increasing your deductibles if your premiums are too high, you should also consider the monthly savings in comparison to how much more you would have to pay if an accident occurred.  

How Car Insurance Deductibles Affect Premiums

Note: This is for a hypothetical six-month collision policy with Progressive

When You Have to Pay Car Insurance Deductibles

If you are found to be at fault for an accident – either fully or partially – you'll likely need to pay your deductible in order to use your own insurance to cover your costs. 

On the other hand, if you are not at fault, you typically won't need to pay any deductibles since the at-fault driver's liability insurance will pay for your vehicle repairs and medical costs. However, if your damages exceed their policy's limits, you may need to pay a deductible if you seek to use your own insurance to cover the rest. Luckily, it is possible for you to recover that cost in civil court.

When Car Insurance Deductibles Do Not Apply

Deductibles never apply to liability car insurance, only to some other types of coverage like collision insurance and comprehensive coverage. 

Three states also make deductibles illegal for windshield replacements and repairs under a comprehensive policy. Those states are Florida, Kentucky, and South Carolina.

To learn more, check out WalletHub's guide to car insurance deductibles.

The average car insurance deductible is $500. In general, the most common car insurance deductibles are $500 and $1,000, but drivers can usually choose any amount between $100 and $2,000 when they purchase their auto policy.

The deductible amount that you choose should be based on what you can afford to pay if your vehicle is unexpectedly damaged. Higher deductible policies tend to have lower premiums, but if you choose a deductible that you can't afford, you risk being unable to actually use your insurance coverage when you need it.

To learn more, check out WalletHub's guide to car insurance deductibles.

If you can't pay your car insurance deductible, you won't be able to file a car insurance claim to have vehicle damage or medical bills paid for by your insurance company. Instead, you will need to set up a payment plan with a mechanic, take out a loan, or save up until you can afford the deductible. On the other hand, in the case of an accident that you did not cause, you can immediately file your claim with the at-fault driver's liability insurance to avoid paying a deductible altogether.  

If you need to wait to file a claim, you'll have anywhere from 30 days to a few years, depending on your state and insurance company. Once you file a claim with your own insurer, there is almost no way to avoid paying your deductible. Even if the insurer doesn't require you to pay the deductible upfront, they will subtract the amount from their final payment, leaving you responsible for any remaining balance.

Your best option is to negotiate a payment plan with the mechanic before they start repairs. This is key because mechanics might not repair your car until they get paid, or they might keep the repaired vehicle until your debt is settled.

It's rare for mechanics to waive the remaining balance – your deductible – altogether, even if they're already making a large profit. It's also considered insurance fraud if a mechanic overcharges your insurance company to compensate for a waived deductible.

Since your options are limited when you can't pay your car insurance deductible, it's important to pick a deductible that you can afford when buying a policy. To learn more, check out WalletHub's guide to car insurance deductibles.

Choosing between a $500 and $1,000 auto insurance deductible depends on how much you can afford right now and how much you expect to save for emergencies moving forward. A lower car insurance deductible means you'll pay less out of pocket in the event of an accident but pay more upfront in premiums. A higher deductible means you'll pay less upfront in premiums but more in the event of an accident.

Drivers nationwide save an average of 8% - 10% on car insurance premiums by increasing their deductible from $500 to $1,000, according to a survey commissioned by InsuraQuotes. But where you live plays a big role in how much you could potentially save by choosing a higher deductible. Drivers in Michigan can save an average of just 4% on premiums by increasing their deductible from $500 to $1,000, while drivers in Massachusetts can save as much as 19%.

Car insurance companies typically use a $500 deductible to give quotes, which means you'll need to make a point of checking how things change with a $1,000 deductible. In doing so, remember that premium savings from a higher deductible will not always be proportional to the extra out-of-pocket costs after an accident.

As a result, you'll need to figure out how much you would save on your premium with the $1,000 deductible and whether those savings are worth an extra $500 out of pocket if you have an accident. If not, you might be better off paying a higher premium in return for lower financial risk on the back end. That's especially true if your vehicle is worth a relatively low amount. For example, if you have an old car that's only worth $2,500, you don't want to carry a deductible of $1,000. It's too close to the total value of your vehicle, which means the replacement cost wouldn't put much more stress on your finances than the deductible itself.

When choosing between auto insurance deductibles of $500 & $1,000, consider your:

• Car's value
• Income
• Monthly expenses
• Savings/reserve funds
• Available revolving credit

It might be worth comparing your premium quote with other deductibles, too. Some companies offer lower and higher options in addition to the more popular $500 and $1,000 deductibles. You'll commonly see $100, $250, or $2,500 deductibles available on car insurance policies.

Although higher deductibles can keep premiums low, it's important to think about what you can afford if something happens. You won't be happy if you can't get your car fixed because you picked a $2,500 deductible and don't have enough money to pay it. So, make sure to factor in how much you'll realistically be able to pay out of pocket without much stress.

No matter what you decide, be sure to set aside enough cash to cover your deductible before you need to make a claim.

You do not have to pay a car insurance deductible if you are not at fault in a car accident. The at-fault driver's liability insurance will usually cover your expenses after an accident, but you may want to use your own coverage, in which case you will likely have to pay a deductible.

It can sometimes take the insurance adjuster a long time to determine fault, which can affect when you receive compensation from the at-fault driver. In that case, you can file a claim with your collision insurance, personal injury protection, or MedPay coverage in order to pay for the cost of repairs or medical bills in the short term.

You will have to pay a deductible for collision coverage and personal injury protection, but your insurance company will eventually recoup your costs through subrogation with the at-fault driver's insurer. However, if you are partially at-fault, then your expenses may be reimbursed in proportion to your fault or not reimbursed at all, depending on your state.    

If the other driver is uninsured or doesn't have enough coverage to pay for your expenses, you can file a claim with your uninsured/underinsured motorist insurance, if you have it. Uninsured/underinsured bodily injury coverage pays for your medical expenses and does not require a deductible. If your car is damaged, your uninsured/underinsured motorist property damage coverage will pay for repairs, and in some states you will have to pay a deductible.

To learn more, check out WalletHub's guide to car insurance deductibles.

You do not have to pay a deductible if someone hits your parked car, that person is identified, and they have property damage liability insurance. If you file a claim with your own collision insurance or uninsured motorist coverage after someone hits your car, then you will likely have to pay a deductible. 

In nearly every state, drivers are required to have property damage liability insurance in order to pay for damage that they cause in an accident. When another driver is at fault, their property damage insurance will cover repairs to your vehicle, and you will not be responsible for paying anything out of pocket. But if the accident is a hit-and-run, you can use your collision insurance or uninsured motorist coverage to pay for the damage. 

Collision insurance pays to repair or replace your car when it's damaged in an accident, and it usually has a deductible between $100 and $1,000. On the other hand, uninsured motorist property damage (UMPD) coverage, which pays to fix your car if you're hit by an uninsured motorist, may not have a deductible depending on your state. Keep in mind that not all states offer UMPD, and even in those that do, you may not be able to use it if the at-fault driver is unidentified.

To learn more, check out WalletHub's guide to car insurance deductibles.  

A good comprehensive deductible is an amount that the policyholder can afford to pay if their vehicle is suddenly damaged by something other than a car accident, such as vandalism or a natural disaster. Comprehensive insurance deductibles typically range from $100 to $1,000, but they can sometimes be as high as $2,500. You choose your deductible when you purchase your policy, and the higher the deductible is, the lower your premium will be.

Comprehensive Deductible Example

As a reminder, a comprehensive deductible is the amount that you have to pay out-of-pocket when filing a comprehensive insurance claim. For example, if a hailstorm causes $5,000 in damage to your car and you have a $1,000 deductible, your insurance company will only pay $4,000 for the repairs.

How to Choose Your Comprehensive Deductible

Before you decide on a deductible, you should consider how likely you are to file a comprehensive claim. If you live in an area that is prone to natural disasters or has a high crime rate, for instance, it may be a good idea to get a low comprehensive deductible.

A collision insurance deductible is the amount of money that a driver must pay out-of-pocket when filing a collision insurance claim. Collision insurance pays to repair or replace a car damaged in an accident, and a driver must pay their collision deductible before their insurance company will cover the remaining costs.

Collision Deductible Example

Say you are at fault in an accident that causes $10,000 in damage and you have a collision deductible of $1,000. You are responsible for covering your $1,000 collision deductible out-of-pocket in order for your insurance company to pay the remaining $9,000.

Collision Deductible Amounts

Collision deductibles typically range from $100 to $1,000, and you select your deductible amount when you purchase your policy. The higher your deductible, the cheaper your premium will be. Although it's tempting to get a higher deductible in order to pay less upfront, you should only choose a deductible that you can afford to pay if your car is suddenly damaged in an accident.

A vanishing deductible is a car insurance program where safe drivers pay a recurring fee in exchange for lower deductibles in the event of an accident. The longer a driver goes without a claim, the lower the deductible can go. In some cases, drivers might enjoy a deductible of $0. Several car insurance companies offer this type of feature, including 3 of the 10 largest auto insurers nationally. But vanishing deductibles are most commonly associated with Nationwide Mutual Insurance Company, and for good reason. Nationwide trademarked the term “Vanishing Deductible” in 2010.

A couple of notable copycat programs include The Hartford's Disappearing Deductible and Allstate's Deductible Rewards. Perhaps the biggest competition for this type of program, however, is good old-fashioned budgeting and saving. Drivers can simply save the money they would be paying in fees in order to easily meet their normal car insurance deductible in the event of an accident.

How Does Vanishing Deductible Car Insurance Work?

Vanishing Deductible from Nationwide and similar deductible-reduction programs from other companies reward drivers for not making claims. The longer you're claim-free, the more you stand to save. These programs are not free to participate in. Prices and rules vary by company, but they all operate in the same basic fashion:

• You inform your car insurance carrier that you'd like to participate in the program.
• You pay a recurring fee on top of your regular insurance premiums to participate. It could be monthly, quarterly, etc.
• After a certain period of claim-free, accident-free driving (one year, five years, etc.), your deductible drops a certain amount—for example, $50 or $100.
• The deductible continues to drop by regular increments as long as a claim is not filed on your policy. In some states, the deductible could stay at a capped low rate, or disappear altogether.
• If a claim is filed, the deductible usually resets to the amount it was when you started the program.

What's the Catch?

There are several caveats to keep in mind when choosing to enroll in a vanishing deductible insurance program. First, you might not be eligible if you've recently filed a claim – in the last 3 years, for example. And even if this type of program is available to you, there's some important fine print to keep in mind.

Caps on How Much You Can Save. Most companies cap the extent to which your deductible can “vanish.” For example, Nationwide's Vanishing Deductible customers will never see more than a $500 reduction on their deductible, no matter how long they pay the enrollment fee or go accident-free. Allstate's Deductible Rewards program has the same limit.

You Can't Predict or Control Damage. You can drive carefully to avoid an accident, but that doesn't protect you from all misfortune. Something beyond your control, such as vandalism or weather-related damage, could still force the need to file a claim. That would cause your future savings to vanish by returning your deductible to normal.

Different Pricing Structures. Some companies charge per car to enroll in the program. In Nationwide's offer, a single vehicle can join the program for $60 per year, and each additional car may be added for an extra $10 per year.

State Law Restrictions: Laws in Pennsylvania and New York prohibit companies from offering a $0 deductible.

Ultimately, consider your driving habits, accident record, and willingness to bet on the safety of your car where you park and drive it. In addition, remember that a vanishing deductible is not the same as a vanishing premium (taking funds from an accrued life insurance policy to meet premiums instead of paying for them out of pocket).

It's a good idea to ask your insurance agent about whether or not you're a good fit for car insurance with a vanishing deductible. It's an even better one to crunch the numbers yourself to see whether paying a recurring fee for a potentially capped discount is worth it.