When choosing your car insurance plan, deductibles will play a vital role in your decision-making process. As the money you pay toward an accident or an insurance claim, your choice in car deductible payments comes in many different amounts depending on the insurance company and the policy of your choice.
Some of the more basic coverages require a set deductible amount. While this may sound confusing at first, it all comes down to simple math.
Opting for higher car insurance deductibles may lead to lower premium payments, but many factors must be considered, such as the value of your car and your status as a safe driver.
The amount you can pay in the event of an accident is more important than your monthly fees, so making a well-informed decision is key to getting the most out of your car insurance.
What’s a Car Insurance Deductible?
A car insurance deductible is the amount of money you pay out-of-pocket to fix your vehicle before your auto insurance policy pays the rest. Every time a covered claim is filed to your insurance provider, you have to pay your chosen deductible, and once you do, the insurer will proceed to cover the rest of the charges.
Car insurance deductibles are part of some of the more standard coverages. Common deductibles include, but are not limited to, collision and comprehensive coverage, as well as uninsured motorist property damage and personal injury protection coverage.
The set amounts available can range between $250 and as high as $2,000. Ultimately, it is the customer’s choice to pick and pay their preferred insurance rate.
How does a Car Insurance Deductible Work?
After filing a claim with your auto insurance company, the cost of repairs for your car is calculated by the total cost of covered repairs subtracted from your car insurance deductible. Your insurance provider will then pay for the difference.
For example, let’s say your vehicle gets T-boned at a busy intersection, and you lose one of its passenger doors.
Typically, the at-fault driver’s liability coverage would take care of everything, but in this case, they don’t have insurance. After all is said and done, the door needs to be replaced, so you submit your claim.
You receive a quote for a new car door, and the entire cost is $2,000. Now, let’s say you picked the $500 deductible option from your current collision coverage. Based on this information, your out-of-pocket costs are only $500. After paying your car insurance deductible, your insurance policy will pay the remaining $1,500, and you get your new car door.
Each auto insurance coverage you have will charge you their respective insurance deductibles separately if they go into effect.
So, if the accident you suffered turned out to be even worse and you ended up sustaining bodily injuries, you now have to pay another deductible for your personal injury protection (PIP). Medical Payments Coverage pays for medical bills on top of what you owe for the collision deductible.
High Deductible vs Low Deductible: What’s the Trade-Off?
Your premium price is directly impacted by your car insurance deductible level. A low car insurance deductible means you’ll pay less when you file an insurance claim, but your rates will be higher. A high deductible means you’ll pay a lower premium but a higher deductible when you file an insurance claim for any damage.
A higher deductible can save you overall costs but comes with the risk of more out-of-pocket expenses when you have an accident. A lower deductible means minimal upfront costs when you file a claim but a higher renewal premium.
Most insurers offer deductibles from $500 to $2,500, with $500 being the average most drivers choose.
The rule of thumb is simple: the higher the deductible, the lower the insurance premium, and vice versa. Since windshield damage is a common insurance claim, many insurance companies offer separate windshield deductibles.
Some insurance carriers even offer a $0 windshield deductible and will cover full replacement costs.
When Do You Pay the Deductible for Car Insurance?
When you have to pay a car insurance deductible, it depends on the type of claim and coverage. Generally, you have to pay a deductible whenever you file a claim with your insurance company for damage to your vehicle, no matter who’s at fault.
Deductibles most commonly apply to comprehensive and collision coverage but can also apply to personal injury protection (PIP) or uninsured/underinsured motorist property damage coverage.
However, there are times when you don’t have to pay the deductible. If another driver is at-fault in the accident, their insurance should cover your vehicle repair costs, and you won’t have to pay a deductible.
If your claim is filed under liability insurance coverage, which pays for property damage or injuries you cause to others, you don’t pay a deductible as long as the costs are within your coverage limits.
Another exception is diminishing deductibles, which reduce over time as a reward for accident-free driving. This can eventually reduce your deductible to zero.
When choosing a deductible, you have to balance your comfort with out-of-pocket expenses versus your monthly premium. Higher deductibles mean lower insurance premiums but higher out-of-pocket expenses in case of a claim.
What Car Insurance Coverages Don’t Require Deductibles?
Liability and uninsured motorist coverage are not subject to deductibles, as they focus on covering third-party damages.
Deductibles are typically involved in claims where the damages involve your vehicle. Medical expenses and all other health coverage are also normally free of deductibles (with the exception of PIP).
While there are no deductibles with these coverage products, they do have their limits depending on which insurance premium you choose. Once the plan reaches the coverage limit, the rest of the payments fall onto you.
How do Deductibles Affect Your Insurance Premiums?
Depending on your chosen amount, car deductibles will determine your monthly (or annual) car insurance rates. The higher your deductible, the lower your car insurance premium will be, and vice versa.
You need to look at it like a balance scale and find your center. Your vehicle insurance might be cheaper, and your bills will be lower, but then you’ll have to pay more out of pocket when something happens to your car and you start filing claims.
Alternatively, you may choose a higher insurance rate, which will give you better peace of mind. You’ll know that your deductible will barely put a dent in your bank account should anything happen to you or your car.
How Should I Choose a Car Insurance Deductible?
There is no one-size-fits-all deductible; the right one for you depends on your financial situation and risk tolerance. Since accidents are unpredictable, consider how much you’re willing to pay out of pocket if a claim arises.
If you want to minimize vehicle repair costs, a lower deductible may be the way to go. This is especially good for older or lower-value vehicles. But if you want to reduce your monthly premium and can afford more out-of-pocket when necessary, a higher deductible can be a cost-effective way to keep coverage while lowering your costs.
Generally speaking, it may be smarter to pick a lower deductible and a higher premium in order to get better coverage for your vehicle. Life can be unpredictable, after all. But you still have the choice to pick an option that suits you best, taking into account your lifestyle and finances.
A few things to take into consideration when choosing your deductible are listed below.
- Your driving record and driving frequency: If you obey the laws of the road and have a clean driving record with no claims, it might be an easier choice to pick a higher deductible, given your safe driving history. It may also not be a bad idea if you work from home and only go out for necessities or the occasional leisure.
- Deductible Affordability: Even the safest drivers aren’t immune to accidents, so it might be a good idea to be well-prepared.
- Age and condition of your car: Older vehicles tend to have more expensive parts due to said parts getting phased out and becoming less readily available the older they are. Sourcing the targeted parts from specialty shops or junkyards could also drive up their price in accordance with supply and demand laws.
- Leasing Company Terms: If you’re leasing your car, the leasing company might ask you to get full coverage and specific deductible amounts. The same applies to any other company providing you with auto loans or financing options. This is usually the only time you won’t have the freedom to select the right car deductible for you.
When Are You Not Required to Pay Car Insurance Deductibles?
The other driver pays if they’re responsible for an at-fault accident. The easiest way to avoid an auto insurance deductible is to have extra coverage and other add-ons.
That could waive your deductible, and you won’t have to pay anything out of pocket because your extra coverage will already cover the costs you would normally spend your deductibles on. Mixing and matching is key to achieving this and, in turn, maximizing your benefits.
Let’s say, as an example, you have comprehensive coverage (which covers your vehicles from any damage not involving collisions, such as vandalism or a fire), and your windshield gets shattered from a falling object. Typically, you might have to pay a deductible when getting it replaced, but with full glass auto coverage, your deductible for glass would go away.
Always discuss these possibilities with your insurance agent so you can make a well-informed decision when combining coverages. Sometimes, this method could cost you more in the long run, especially if you’re a safe driver.
Alternatively, some insurance companies will give you the option of a zero-deductible policy at the cost of a high premium. These options tend to vary by location, as some states legally require you to have a deductible in some coverages, such as the PIP.
Get Affordable Auto Insurance with Flexible Deductibles today!
As you decide the auto deductible amount you’re willing to include in your auto insurance policy, our insurance agents will walk you through the best coverages and rates that will fit your budget and your vehicle’s best interest.
Still unsure what to do with deductibles? Call our insurance experts, and they will provide you with all the necessary information and financial tips in order to offer you the best insurance products when deciding and saving on the best auto insurance in the market.
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Frequently Asked Questions
Do I Have to Pay the Deductible if I Am Not at Fault in an Accident?
If the other driver is at fault and their insurance company accepts liability, you will not have to pay your deductible. However, if the other driver is not at fault or lacks insurance, you may have to pay the deductible first and then get reimbursed once liability is determined.
Is My Car Insurance Deductible Applied Per Accident or Per Year?
Most car insurance policies have deductibles that are “per claim” or “per accident”. This means you have to pay the deductible every time you file a claim for a covered event during the policy period.
What’s the Difference Between Collision and Comprehensive Deductibles?
- Collision Insurance Deductible: A collision deductible is for damages from a collision with another vehicle or an object (guardrail, tree, etc.)
- Comprehensive Insurance Deductible: A comprehensive deductible is for non-collision events (theft, vandalism, fire, natural disasters)
Can I change my car deductible at any time?
Yes, you can usually change your deductible during your policy term, but your insurance company may adjust your premium. Check with your agent to see the timing and the out-of-pocket cost implications.
Will Increasing My Deductible Always Lower My Premium?
Yes, generally. Insurers offer lower insurance premiums to policyholders who choose higher deductibles. But the savings amount depends on the insurer and you.
Do I Have Separate Deductibles for Different Types of Coverage?
Each type of insurance coverage with a deductible (collision or comprehensive) has its own deductible amount. If you file a claim that involves multiple types of insurance coverage, you may have to pay multiple deductibles, although insurance policy terms and state regulations may vary.
What If an Uninsured Driver Hits Me?
If you are hit by an uninsured driver, your uninsured/underinsured motorist coverage may apply, and you may have to pay a deductible. Whether you get reimbursed depends on whether it’s possible to recover from the at-fault driver.
Can My Financing or Leasing Company Affect My Deductible Choice?
Financiers and leasing companies may have deductible limits (usually $500 or $1000) to protect their interest in the vehicle. Before changing your deductible, review your lease or loan agreement for any such requirements.
Can My Auto Insurance Company Waive My Deductible?
Sometimes, deductibles can be waived by different car insurance companies. Some policies have coverage endorsements that waive the deductible under certain conditions, and some states have laws that require waiver for certain claims (like windshield repairs). Check your policy or talk to your insurer.
