What is a car insurance deductible?

You’ll be glad you have car insurance when you get into an accident and damage your vehicle. But don’t expect your policy to cover the entire cost of repairs, even if you have full coverage.

Most car insurance comes with a deductible, which is money you need to pay out of pocket before your coverage kicks in. Your policy may have several different deductibles, and there are even ways to avoid paying them. Keep reading for everything you need to know about car insurance deductibles.

Key highlights

• A car insurance deductible is the portion of a repair cost that you are expected to pay out of pocket before your coverage takes effect.
• Policies can have different deductibles for collision and comprehensive coverage.
• You can often choose your deductible amount, say $500 or $1,000, and higher deductibles can lead to lower car insurance premiums.

What is a car insurance deductible?

Like most insurance products, car insurance typically comes with a deductible.That is the amount of money you are responsible for paying before your insurer will cover any claim.

“A deductible is what you’re going to pay out of pocket at the time of a loss,” says Erin Newell, an agent with Insurance Services Agency of Gun Lake, an independent insurance agency in Wayland, Michigan.

The amount of that deductible can depend on what caused the loss and whether you were at fault. A $500 deductible is common, but you may be able to increase it to $1,000 or more, or decrease it to no deductible. Check your coverage details to see what deductibles are included in your car insurance policy.

How does a car insurance deductible work?

When you submit a claim, your insurer will first determine what part of your insurance applies in the situation: liability or property damage.

Liability insurance doesn’t usually have a deductible, but both comprehensive and collision property damage coverage does. Assuming your claim is subject to a deductible, any payment made by your insurer will be reduced by that amount.

For instance, let’s say you are in an accident, and it will cost $5,000 to repair your car. If your deductible is $500, then your insurer will pay $4,500. You are responsible for covering the remaining balance in the event that repair costs exceed your coverage amounts

When do you pay the deductible for car insurance?

Car insurance deductibles are subtracted from the amount of money paid out for a claim. Unlike health insurance, which typically has one cumulative deductible for the entire year, car insurance applies the deductible to each claim you make.

You’ll pay the deductible when you have your vehicle repaired. The insurer will pay an approved amount minus the deductible, and you will have to pay the mechanic or body shop for the remainder.

If your vehicle is considered a total loss, the situation is slightly different. In that case, your insurance company will pay the value of your car minus the deductible. For instance, if your insurer determines your vehicle had a value of $15,000 and your deductible is $500, you will receive a payment for $14,500.

Standard deductibles used to be $100 for comprehensive and $500 for collision, according to Newell, but insurers have been working to increase those in recent years.

“Mother Nature has not been so kind so we are seeing soaring prices,” she says. As claims for natural disasters increase, she’s seen some insurers push to make $1,000 deductibles mandatory.

What is the difference between a premium and a deductible?

Your car insurance premium is the amount of money you pay to keep your policy in effect. It may be paid monthly, quarterly, annually or on another schedule. If you don’t pay your premium, you won’t have any coverage.

Your deductible is the amount your insurer requires you to pay when you make a claim. In other words, you are sharing the cost of your claim with the insurance company. The larger your share of the cost – meaning, the larger your deductible – the lower your premium may be.

What types of auto insurance deductibles are there?

Auto insurance is broken down into the following components and each can have their own deductible.

• Liability: This pays for expenses that are incurred when you injury another person or damage another person’s property. It’s uncommon to have a deductible for the liability portion of your policy.
• Comprehensive: “Comprehensive insurance covers what we call ‘Act of God’ (incidents) – things outside your control,” Newell says. It may be a rock hitting your windshield or damage from a natural disaster.
• Collision: This coverage pays for damage that occurs when your vehicle hits another vehicle or object. Depending on how your policy is written, you may not have to pay a deductible on a collision claim if you are not at fault for the accident. A $500 deductible is usually standard for collision coverage, Newell says.
• Other coverage: Depending on your state, you may also have deductibles for personal injury protection coverage or uninsured motorist property damage. However, not all states allow deductibles for these coverages.

If you choose to purchase comprehensive or collision coverage, you can choose a different deductible for each.

When can I avoid paying my car insurance deductible?

There are a couple ways to avoid paying a car insurance deductible. The most obvious being to not file a claim if your car is damaged but still can be legally driven.

“You can do a zero-dollar deductible, but it is going to cost you way more premium-wise,” Newell says.

Some insurers also have what is known as “disappearing deductible” policies, in which deductibles are reduced over time.

An example is Progressive’s Deductible Savings Bank. It reduces your comprehensive or collision deductible by $50 for each six-month period you go without making a claim. Not available in every state, the Deductible Savings Bank is an optional plan coverage that must be purchased with your car insurance.

Petitioning the car insurance company of the at-fault driver is another way to avoid paying a deductible, according to Newell. This strategy can be used in states and with policies which don’t automatically waive the deductible in these instances.

What if I don’t pay my auto insurance deductible?

If you don’t pay your auto insurance deductible, you may not be able to have your vehicle repaired or replaced with a comparable car.

Often, an insurer will pay an approved mechanic directly for whatever repairs were required. If you are unable to pay the deductible, which is the remaining amount owed to the shop, you aren’t likely to get your vehicle back without working out a payment plan of some sort.

Frequently asked questions

How do you pay your car insurance deductible?

In most cases, you will pay the deductible to the mechanic that repairs your vehicle. Your insurer will pay an approved amount minus the deductible, and you must cover the portion of the bill equal to the deductible

Do I have to pay my deductible before or after my car is fixed?

Generally, people pay their deductible after their car is fixed, just as with any other vehicle repair.

Do I have to pay my deductible to fix someone else's car?

No, if you damage someone else’s car, any payment from your insurer will come from the liability portion of your coverage. With few exceptions, there is no deductible associated with liability payments.

Is it better to have a $500 deductible or a $1,000 deductible?

A $500 deductible is common, but those who want to lower their premiums may prefer a $1,000 deductible, which will result in a lower premium (though more out-of-pocket costs in the event of a claim). Your insurer should be able to give you premium quotes using both deductibles so you can decide which is better for your financial situation.

Bottom line

Car insurance provides valuable coverage, but it does you no good if you can’t pay your deductible and fix your car after an accident. Be sure to select a deductible that you will be able to comfortably cover with your savings.

If you only have minimal savings, make it a priority to boost your emergency fund. Then, as your emergency savings grows, you can increase your deductible and lower your monthly premiums.