DEDUCTIBLE CAR INSURANCE: What Is It & How Does It Work?

You have likely wondered, “What is a deductible?” similar to “How does a deductible work for car insurance?” The portion of a claim that you pay “out of pocket” before your insurance pays the remaining amount is known as your deductible for car insurance. A car insurance deductible is something that most types of insurance, even ones for people who were at fault, have. Usually, you can choose between a high and low deductible. A high deductible lowers your insurance rate, while a low deductible raises it.

Deductible Car Insurance

As the name suggests, deductibles are the sum of money you must pay when a claim is eventually settled. In other words, they are “deducted” from the total amount of money you receive as compensation. Your car insurance deductible is the sum of money you have to pay when you claim a specific kind of coverage. The insurance company will contribute to the remaining costs, up to the policy maximum, after the deductible has been met, for things like car repairs and medical bills.

The deductible on your car insurance policy is the out-of-pocket amount you must pay before your policy begins paying for damages to your vehicle or medical expenses caused by an accident.

Types of Deductibles

When claiming your auto insurance, you will likely be required to pay your deductible if you have any of the following policies.

#1. Collision Deductibles

This applies if your vehicle collides with another object, such as another car, a house, or a guardrail. If your car collides with a stationary object, such as a guardrail or pole, collision coverage can assist with the cost of repairs. The California Department of Insurance states that the typical collision coverage deductible amounts are between $200 and $1,000.

#2. Comprehensive Deductibles

This includes claims for damage or loss caused by natural disasters, theft, vandalism, and other events that did not involve a collision. Comprehensive coverage helps defray the cost of fixing your car in the event of damage from things like hail, theft, and burglary. Comprehensive coverage has deductibles between $50 and $1,000.

#3. Uninsured Motorist Coverage

If someone without insurance hits your car, uninsured motorist coverage helps to pay for the repairs. The deductible for this protection might be less than that of a collision policy. The maximum deductible that can be charged in certain states is limited by law, ranging from $150 to $500.

#4. Diminishing Deductibles

If you drive safely, some insurance companies will reward you with an optional feature known as a “diminishing deductible.” It’s also sometimes called a “vanishing” or “disappearing” deductible

If you can avoid accidents and keep a spotless driving record, your insurance company will reward you with a lower deductible over time. For example, your insurance company might give you a $100 credit on your deductible every year that you are a safe driver. If you maintain a perfect driving record for three years, your deductible could drop from $500 to $300. Your new deductible will be $200.

Which Circumstances Do Not Have a Deductible?

In the following situations, you most likely will not have to pay the car insurance deductible:

If another driver caused an accident, their liability insurance will pay for your damages up to the limits of their policy.
If an accident occurs and you are found liable for damages, your liability insurance will pay for those damages up to your policy limits.
An uninsured or underinsured driver is at fault: When it comes to specific physical injuries covered by your uninsured/underinsured motorist (UI/UIM) coverage, some states or insurance companies might not make you pay the deductible.
Glass replacement vs. repair: If you choose to repair glass instead of replacement, some insurance companies will waive your deductible. Certain states require insurance companies to cover broken window glass with no deductible if you have full coverage.

For some coverages or from some insurers, you may be able to get a deductible of $0 by opting for a “diminishing deductible” endorsement, deductible waiver, or zero-deductible coverage.

How to Choose the Right Deductible Amount

The right amount for your deductible will depend on your budget, how likely it is that you will need to make claims, and how comfortable you are with taking risks.

#1. Budget

Raising your insurance policy’s deductible can reduce your monthly payment. But, you should make sure you have enough money saved up to cover the deductible in the event of an accident or even auto theft. Keep in mind that your premium and any out-of-pocket deductibles you pay determine your overall annual cost.

#2. Risk

Think about how likely it is that you or your covered loved ones will need to make a claim. Review recent years and note any claims filed. You should also think about things like the driving record of the covered drivers, the rate of car theft where you park your cars, and damage from weather events. You may choose a higher premium if you do not expect to file many claims.

#3. Risk Tolerance

How much risk you are willing to take will also affect your choice. Those who err on the side of caution might favor a higher premium in exchange for a lower deductible. You might want a higher deductible if you do not mind keeping your fingers crossed that nothing bad happens.

#4. Car Age and Value

You might find it advantageous to select a plan without a deductible, like minimum coverage, if your car is over 15 years old or worth between $1,000 and $3,000. Due to lower insurance payouts for older or depreciated vehicles, you may be responsible for covering all or most of the repair costs in the event of a claim.

How Does Deductible Car Insurance Work

Each time you file a claim, you are accountable for paying the specified deductible under your policy. After you pay your car insurance deductible, your insurance company will pay for the rest of the costs associated with fixing or replacing your car. Say an accident causes $5,000 in damages and your deductible is $1,000. Your car insurance will cover $4,000 of the repair cost, leaving you to cover the remaining $1,000. Car insurance deductibles work the same way for all types of coverage.

High vs. Low Car Insurance Deductibles

For car insurance, you typically have a choice between a higher and lower deductible. Most car insurance deductibles are between $100 and $2,000. The $500 deductible is the most popular option among our drivers, but there is no right or wrong amount. It boils down to personal preferences and needs.

A higher deductible means you pay more out of pocket and your car insurance rate goes down.
A lower deductible means you pay less for your car insurance and your rate goes up.

Pick a deductible amount for your car insurance that you feel secure with, and make sure you have the cash on hand to cover it if you ever have to file a claim. You should also think about your driving record and how likely it is that you will need to file a claim.

When Is It Necessary to Pay a Deductible on Auto Insurance?

Any time you file a claim for damage that exceeds the deductible amount, you will be responsible for paying the difference out of pocket. If your claim is approved, your deductible will usually be taken out of the amount your insurance company pays you. For the most part, you do not need to send your insurer a check or pay them. They just deduct the amount of your deductible from the authorized settlement of your claim.

How Much is Deductible Car Insurance

Car insurance deductibles are the amounts that drivers usually pay out of pocket when they need to make a claim. The deductible can be very different depending on the type of insurance you need, your driving record, the value of your car, and other things.

The average deductible for drivers is usually $500. Other typical deductible amounts are $250, $1,000, $1,500and $2,000. Also, you have the option of choosing different deductibles for collision and comprehensive insurance. You might, for instance, have a deductible of $1,000 for collision damage but only $5,00 for comprehensive coverage.

Deductibles for car insurance can be anywhere from $0 to $2,000, with $500 being the most common. A lot of insurance companies set the deductible at $500, but you can also see deductibles of $250, $1,000, or $2,000.

Deductible Car Insurance Not at Fault

Should it be officially established that the other driver is at fault, you will not have to pay your deductible and their car insurance company might cover your repairs if you file a claim. Should you possess collision coverage, you may also opt to proceed via your insurance provider, who will pursue payment (inclusive of your deductible) from the other driver’s insurance provider. In circumstances where there is a shared fault, you might have to pay your entire car insurance deductible.

When it comes to car insurance, the party who was not at fault typically does not have to pay the deductible. The at-fault party’s property damage liability insurance should cover your losses. If the at-fault driver has no insurance or not enough car insurance, you will have to file a claim with your insurance company and may have to pay a deductible. If the fault is contested or if you were even partially to blame for the accident, you may have to pay the deductible before your insurance company will pay for the repairs.

How Can I Avoid Paying My Car Insurance Deductible?

Your auto insurance deductible is typically an expense that you cannot avoid paying. It is possible to lower your auto insurance deductible lawfully and responsibly.

Put off filing a claim until you can afford to pay it.
Verify your policy; you might be exempt from paying in full.
Negotiate a price with your mechanic.
Take out a loan.

Should I Pay a High or Low Deductible?

Picking the appropriate deductible for your insurance policy is a gamble. Assuming you never need to file an insurance claim, raising your deductible will save you money every time. When you do file a claim, though, a high deductible could wipe out your savings. You can choose between low-deductible and high-deductible insurance by comparing different policies.

How Do I Avoid a High Deductible?

If your deductible is low, your insurance rate will be higher. If your deductible is high, your insurance rate will be lower. The only real way to avoid having to pay a deductible on your auto insurance is to never make a claim. If not, you will have to pay the deductible if you make a claim.

How Do I Choose a Deductible?

Do not rush when picking your deductibles. If your deductible is higher, your insurance premium will be lower. In the event of a claim, on the other hand, a lower deductible entails a larger payout. Evaluate your needs, coverage, financial situation, and the costs of other providers before deciding on a deductible.

Does a Lower Deductible Mean Higher Monthly Payments?

In exchange for higher premiums each month, a low deductible plan reduces your out-of-pocket costs. Therefore, you should consider your financial constraints and shop around for the best deal.

What Is the Point of Insurance if You Pay a Deductible?

A deductible is the amount you are responsible for paying out of pocket before your insurance company begins to pay for covered expenses. Insurers use deductibles to guarantee that policyholders will contribute to the settlement of any claims.

Do Insurance Companies Ever Waive the Deductible?

The insurance company’s target market and clientele determine when to waive deductibles. Insurance companies will only forgive deductibles if they can pin the blame on the wrong person

Conclusion

The deductible is a standard feature of car insurance. Setting your deductible amount wisely can have a major impact on your annual budget. Different insurance companies charge different rates for their policies, so it pays to shop around and compare quotes.

DEDUCTIBLE CAR INSURANCE: What Is It & How Does It Work?

Deductible Car Insurance