Let’s say you just got in a wreck and your car needs $4,000 in repairs, but your insurance will only cover $3,000. If you're confused, understanding your car insurance deductible might be the answer. In this article, we’ll explain what a car insurance deductible really is, when you need to pay it, and whether you should choose a high or low one.
Whenever you shop for car insurance, we recommend getting quotes from multiple providers so you can compare coverage, rates, and deductibles. In addition to the insurance company you choose, factors such as your age, vehicle make and model, and driving history can affect your premium, so what’s best for your neighbor might not be best for you.
Use our tool below to start comparing personalized car insurance quotes or call (844) 246-8209 for an easier process.
In this article:
- What Is A Car Insurance Deductible?
- How Do Car Insurance Deductibles Work?
- Types Of Insurance Coverages With Deductibles
- When Do You Pay A Car Insurance Deductible?
- How To Choose A Car Insurance Deductible
- What Happens If You Can’t Pay Your Deductible?
- Our Recommendations For Car Insurance
- FAQ About Car Insurance Deductibles
What Is A Car Insurance Deductible?
A car insurance deductible is the amount of money that you pay out of pocket before your insurance provider covers damages after an accident or other event. You don’t actually pay a deductible to the insurance company – you pay it to the repair shop when they fix your car. Depending on your state, you might have a deductible for other types of coverage, too.
Let’s say you file a claim that results in a $2,000 expense. If you have a $500 deductible, you must pay that amount before the insurance company pays the remaining $1,500.
However, if you have a $500 deductible but your car repair costs are only $400, that means you’ll have to pay the full amount of repairs without the auto insurance company’s help. Insurers will not be responsible for expenses that do not exceed your deductible.
Health Insurance Vs Car Insurance Deductible
Your car insurance deductible doesn’t work like your health insurance deductible. With health insurance, you have a deductible that gets reset every year. As you use health services, the money you spend out of your own pocket will add up. Once it hits the deductible amount, your health insurance takes over. When the new year rolls around, it all starts over.
With car insurance, you pay your deductible every time you file a claim. Let’s say you got into an accident and filed a collision claim. On your way to the repair shop, a freak hail storm adds more damage to your car. You’ll file a separate comprehensive claim for that damage, and you’ll pay your deductible on both claims. There is no limit to how many times you pay your deductible in a year. If you file five different collision claims in one year, you’ll pay your deductible five times.
How Do Car Insurance Deductibles Work?
When you start an auto insurance policy, you get to choose the coverage amounts. Your insurance premium and car insurance deductible will teeter depending on the amounts you choose.
Increasing your out-of-pocket deductible will lower your monthly insurance premium.
Average Car Insurance Deductibles
Insurance companies give drivers different deductible amounts to choose from, and most options fall between $100 and $2,000. Many people choose a $500 car insurance deductible, and companies usually use $500 as the default choice. However, $250 and $1,000 are popular choices, too.
Another thing to know is that you can select different deductible amounts for different types of coverage. For example, if you live in an area with frequent bad weather, you might want to choose a lower comprehensive deductible to limit what you pay out of pocket. At the same time, you can keep your collision deductible higher to balance out your auto insurance premium.
Types Of Insurance Coverages With Deductibles
Here are the common types of car insurance, with details on what they cover and whether they require a deductible or not.
|Insurance Type||Coverage Details||Deductible|
|Collision Coverage||Covers damage to your own car after an accident||Yes|
|Comprehensive Coverage||Covers damage to your vehicle after non-collision events like hail, theft, or vandalism||Yes|
|Uninsured Motorist (UM)||Protects you and your car after getting hit by an uninsured motorist||Depends on state|
|Underinsured Motorist (UIM)||Protects you and your car after getting hit by an underinsured motorist||Depends on state|
|Personal Injury Protection (PIP)||Covers your medical bills, lost wages, and more after an accident||Depends on state|
|Medical Payments (MedPay)||Covers your medical bills after an accident||Depends on state|
|Bodily Injury Liability (BI)||Covers the other party’s medical bills in accidents you cause||No|
|Property Damage Liability (PD)||Covers the other party’s repair costs in accidents you cause||No|
Keep in mind, even though collision and comprehensive insurance require a deductible, you might be able to select a $0 car insurance deductible depending on the policy. In that case, your car insurance premium would cost more to offset the $0 car insurance deductible.
When Do You Pay A Car Insurance Deductible?
Here are the main situations in which you’d be responsible for paying a deductible:
- At-fault collision: If you cause an auto accident and your car needs repairs, you’ll pay your deductible on your collision coverage.
- Not-at-fault collision: Theoretically, you shouldn’t have to pay your deductible if you weren’t at fault in a car accident. However, it can take a long time to get a settlement from an insurance claim. During that time, you can fix your car by filing a claim with your own insurance company. In that case, you’ll pay your deductible upfront. If your insurance company recovers funds from the at-fault party (through a process called subrogation), it will reimburse your deductible. If not, you can take the other party to small claims court and try to get your money back.
- Comprehensive claim: When your car needs repairs after other events like a lightning strike or flood, you’ll need to pay a deductible. Comprehensive also covers glass damage, though some companies may waive your deductible if they can repair the glass instead of replacing it.
- PIP claim: No-fault states require PIP coverage. It pays your medical bills no matter who was at fault in an accident. However, many states require you to pay an auto insurance deductible before PIP kicks in. The amount can vary, and it can be different than your collision or comprehensive deductible.
- Uninsured motorist claim: UM comes in bodily injury and property damage coverage varieties. Bodily injury UM doesn’t usually require a deductible. However, property damage UM coverage can require a deductible. That means you might have to pay a deductible to repair your car if you get hit by a driver without insurance. The same goes for underinsured motorist coverage.
How To Choose A Car Insurance Deductible
Now that you know what a car insurance deductible is, it is important to choose the right deductible for your situation.
When To Choose A High Insurance Deductible
You should choose a high car insurance deductible if you want to lower your monthly bill and if you have the ability to pay it. That last part is important. If you don’t have any savings, it’s not a smart idea to have a high deductible.
You might be the best driver in the world, but you still share the road with bad drivers and uninsured motorists. According to the Insurance Information Institute, about 6 percent of drivers who had collision coverage filed a claim in 2018. As we mentioned above, you might have to pay a deductible to fix your car even if you weren’t at fault. You can always choose a lower deductible while you save up an emergency fund and then raise the deductible later on.
When To Choose A Low Insurance Deductible
You should choose a low car insurance deductible if you don’t have the ability to pay a high one, or if you want to protect your out-of-pocket costs. A low deductible could be a good idea if you live in a congested area where you have a higher chance of experiencing an accident.
A $1,000 deductible is usually the sweet spot for savings. Bumping a $500 deductible up to $1,000 will give you a better discount than increasing a $1,000 deductible further to $2,000. Choosing a $250 deductible over a $100 one will also save you a significant chunk of money.
Vanishing Car Insurance Deductibles
A vanishing deductible program is an extra coverage option that a few providers like Nationwide car insurance and The Hartford auto insurance offer. Each company’s program can be a little different, but they follow the same basic formula. You usually get $100 toward your deductible for each year you go without making a claim.
Some programs limit your savings to $500 no matter the size of your deductible, while others – like Progressive car insurance’s Deductible Savings Bank – let your car insurance deductible shrink to $0 if enough time goes by. AAA car insurance’s Ultimate car insurance plan has a similar program. Also, some programs will reset your deductible to the full amount after you make a claim, and others will reset it to a smaller amount.
Lastly, these programs aren’t free. They can cost around $20 or more per year. After five years, you would have paid an extra $100 or more to your insurance company. Other than peace of mind, you only get something out of a vanishing deductible program if you get into a car accident and file a claim.
We’ve reviewed a number of the top car insurance companies in the industry and ranked them on things like coverage, claims servicing, discounts, and financial strength. If you’re wondering which companies to get quotes for, our review of the best car insurance companies is a good place to start.
Our tool below can help match you with personalized quotes. You can also call our team at (844) 246-8209.
What Happens If You Can’t Pay Your Deductible?
When paying out an insurance claim, your insurer will often write you a check for the amount it’s responsible for covering. If you are unable to pay the remainder of your costs for the deductible, you may have some options. Below are some steps you can take if you can't afford to pay your deductible:
- Discuss a payment plan with your repair shop: It could be worthwhile to talk to your mechanic about payment options after an accident. You might be able to negotiate with the mechanic to waive your deductible or for a payment plan.
- Take your car to a different repair shop: If you decide to take your auto insurance check to another repair shop, it could mean cheaper repairs.
- Continue to use your car until you can afford your deductible: Many drivers choose use their car (if it’s still operable) until they can come up with the deductible amount. Waiting to file a claim is not uncommon, but it is advised to submit a claim as quickly as possible.
- Take out a personal loan: When a car insurance repair is urgent, taking out a loan might be the best option. It will likely get you, your vehicle, and other parties involved back on the road sooner.
- Consider supplemental options: You can choose to use a credit card or ask family or friends for assistance to pay your car insurance deductible, but we recommend seeking advice from an expert before making any upfront financial decisions.
Don't fret if you can't pay your car insurance deductible after an accident right away. Knowing when to adjust your deductible and when to shop around for a new car insurance company with affordable rates is the safest way to avoid high expenses in the future.
Our Recommendations For Car Insurance
Searching for car insurance doesn’t have to be difficult. Just make sure to get quotes from multiple providers, so you can compare rates.
#1 Geico Insurance: Best Overall
Geico is one of the largest insurers in the nation with a strong financial backing and the goal to save drivers the most amount of money. It offers competitive car insurance rates for its six standard insurance coverage options. You can also add more coverage like rideshare insurance, accident forgiveness, and roadside assistance.
Ask one of Geico’s agents about its many discounts like safe driving, safety features installed in your car and bundling multiple policies. In our review, Geico earned a 4.5-star rating overall.
Read more in our full review of Geico insurance.
#2 Progressive Insurance: Best For High-Risk Drivers
Progressive auto insurance is also available nationwide and is a great option for high-risk drivers. The insurer has full coverage options, plus add-ons like roadside assistance, gap insurance, and rideshare coverage.
There are many available discounts, including those for safety features on your car, going paperless, and paying your premium in full. Progressive has an easy quote process, which allows you to compare other auto insurance companies right on its website. Progressive received 4.5 stars in our in-depth review.
Read more in our full review of Progressive insurance.
#3 USAA Insurance: Best For Military
USAA auto insurance is known for its exclusive coverage for military members and their families. The company provides standard coverage, plus extra coverage like rental reimbursement and accident forgiveness.
USAA has great rates that are already highly discounted, but drivers can also unlock discounts like a good student discount, defensive driving discount, and new vehicle discount. USAA came out on top in our industry review as the only provider to earn a 5.0-star rating.
Read more in our full review of USAA insurance.
In an effort to provide accurate and unbiased information to consumers, our expert review team collects data from dozens of auto insurance providers to formulate rankings of the best insurers. Companies receive a score in each of the following categories, as well as an overall weighted score out of 5.0 stars.
- Industry Standing: Insurers with strong financial ratings and customer-first business practices receive the highest scores in this category.
- Availability: We consider availability by state as well as exclusions for specific groups of drivers.
- Coverage: This rating is based on types of insurance available, maximum coverage limits, and add-on policies.
- Cost and Discounts: Our research team reviews sample quotes for a variety of drivers in every state. Companies with lower prices and many car insurance discount opportunities receive the best scores.
- Customer Service: We comb through customer reviews and consumer feedback studies from experts like J.D. Power.
- Technology: Auto insurers with mobile apps, advanced online services and telematics are more likely to meet consumer needs.
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