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A car insurance deductible is the amount you have to pay out of pocket before your insurance policy will cover repair bills or medical expenses.
Explained: Collision Car Insurance
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Take A Look At Your Car Insurance
Edited by Rashaun Mitchner Edited by Rashaun Mitchner Managing Editor Rashaun Mitchner is an editorial team editor with over 10 years of experience covering personal finance and insurance topics.
If your car has been damaged in an accident and needs repairs, you will need to pay a certain amount before the insurance coverage starts. The amount you pay is called the car insurance deductible. Our team of guides explain how car insurance deductibles work, when you have to pay them and how to choose them when buying a policy.
We’ve researched the best car insurance companies in the country to help you find the best one for your needs. We recommend comparing car insurance offers from several providers before purchasing a policy.
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The Guides team is dedicated to providing reliable information to help you make the best decision about insuring your car. Because consumers rely on us to provide objective and accurate information, we’ve created a comprehensive rating system to rank the best car insurance companies. We collected data from dozens of auto insurance providers to rate companies based on a number of rating factors. After 800 hours of research, the final result was an overall ranking of each provider, with the best insurers topping the list.
A car insurance deductible is the amount you have to pay out of pocket before your insurance company will cover medical bills for car repairs or a car accident. You pay the deductible directly to the repair shop that repairs your car or the medical facility that provides your treatment.
For example, let’s say you have a $500 deductible and file a claim for $2,500 in auto repairs. You must pay the mechanic $500 before your insurance carrier will cover the remaining $2,000 in repair costs. If your repair costs are less than your deductible, you will have to pay the full amount yourself.
Car insurance deductibles work differently than health insurance deductibles. Unlike auto insurance, health insurance deductibles reset each plan year. Your health care costs accumulate over the course of the plan year, reducing your deductible. Once you’ve met your deductible, your health insurance company will begin paying for medical expenses. This deductible will reset after the policy is renewed.
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You pay your car insurance deductible every time you apply. Your affordable costs don’t add up over time. In addition, different types of insurance require different deductibles.
In most cases, it is possible to choose a deductible when purchasing a car insurance policy. The deductible affects your premium. If you choose a higher deductible, you will pay a lower premium. A lower deductible usually means you pay a higher premium.
There are certain factors you should consider when choosing a deductible. If you live in a city with a statistically high rate of theft, or an area with a lot of bad weather, you may choose a lower deductible amount, as this type of insurance covers theft and damage such as flooding. You can opt for a higher collision deductible to offset the premium increase.
The most popular auto insurance deductible is $500, but it can range from $0 to $2,000. Most insurers set the default deductible at $500, but deductibles of $250, $1,000, or $2,000 are common.
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Vanishing deductibles, sometimes called “disappearing” or “shrinking” deductibles, are offered by some insurance companies to reward people for their safe driving habits. With these plans, your deductible is reduced or eliminated the longer you go without a traffic violation or car accident.
A disappearing deductible is essentially a credit that is applied to your deductible every year if you don’t have an accident or lose your driving license. Each year when you renew your policy, this credit is applied to your deductible, reducing it. If you go long enough without an incident or your insurance fails, you can get a $0 deductible.
Certain types of coverage require a deductible, while others do not. For example, liability insurance doesn’t cover your medical bills or car repairs, so there’s no deductible on a liability policy. Each state has its own insurance rules, so some states may not require deductibles for certain types of insurance.
Covers you and your passengers for medical expenses, health insurance deductibles and funeral expenses after an accident, regardless of who is at fault
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Covers medical bills, lost wages, household services and funeral expenses for you and your passengers, regardless of who is at fault
Covers medical expenses for you and your passengers if you’re hit by a driver who doesn’t have enough car insurance
Covers medical expenses for you and your passengers if you are hit by a driver without auto insurance
Covers the cost of repairing your car if you’re hit by a driver who doesn’t have enough car insurance
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Covers the cost of repairing your car if you’re hit by a driver who doesn’t have auto insurance
Check your state’s insurance guidelines when looking for auto insurance coverage. You don’t want to be caught with a deduction you didn’t expect.
There are some common times when you have to pay your auto insurance deductible. These scenarios include:
If your car is damaged in a non-collision event, such as a natural disaster or vandalism, you must pay a deductible before the policy takes effect.
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If you live without fault, you must have PIP coverage (although Kentucky, New Jersey, and Pennsylvania allow drivers to opt out). Depending on the state, you’ll pay a deductible before the policy covers medical expenses. Utah does not allow deductibles for PIP insurance.
There are two types of uninsured motorist coverage: bodily injury (UMBI) and property damage (UMPD). UMBI does not usually require a deductible, but UMPD often does. If you live in a state that requires a UMPD deductible, you must pay it before your insurance carrier will cover your repairs.
In this case, you can file a claim with your insurance and pay the deductible while the car is being repaired. Your insurer will likely try to collect your deductible from the at-fault driver’s insurance company. You also have the option of suing the other driver.
If you are not at fault in the accident and the other party’s insurance pays for the vehicle repair, you do not have to pay the deductible. You also don’t have to pay a deductible if you’re enrolled in a disappearing deductible program and have earned enough credit to cover the deductible.
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Choosing a deposit depends on your financial situation. To get a better idea of what deductible makes sense for your needs, consider the factors below.
When choosing a deductible, consider how likely you are to make a claim. The higher your risk, the more likely you’ll be stuck with big bills. Drivers who are more likely to file an insurance claim.
If your car is more than 15 years old or worth $1,000 to $3,000, you may benefit from choosing a no-deductible plan, such as minimum coverage. Older or depreciated cars have lower insurance premiums, which means you could be stuck paying all or most of the repair bill in the event of a claim.
If you took out a loan or lease for a new car, the terms of your contract may require a special deduction. If you have any questions about claiming a deduction, contact your loan officer or lender.
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Choosing a higher deductible can lower your annual or monthly auto insurance premiums. However, if you are at fault in an accident, you could be on the hook for a big bill.
Choosing a high deductible for low premiums is a smart choice for those with some savings and a history of safe driving.
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