What Is a Car Insurance Deductible and How Does it Work?

How Deductibles Work

If your vehicle suffers damage, you may be able to file an insurance claim to cover the cost of repairs or replacing your vehicle. However, before the insurance company sends you a check, you need to cover the deductible.

In most cases, the insurance company deducts your deductible from the payout. This means that you don’t need to send a check or an electronic payment.

For example, you have a $300 deductible and $2,500 in damages after being involved in an accident covered by your insurance policy. The insurance company may deduct $300 and send you a check for $2,200.

The deductible is set when you purchase your policy. It’s a part of most insurance policies that cover damages, such as comprehensive auto insurance or collision insurance.

The higher the deductible, the lower your rates. However, there’s more to consider. Here’s what you should know about how deductibles work.

Pros and Cons of High vs. Low Insurance Deductibles

Many auto insurance providers allow you to choose between a higher and lower deductible. Both options offer separate advantages and potential drawbacks.

If you choose a higher deductible, you get a lower rate but need to pay more in the event of an accident. If you choose a lower deductible, you get a higher rate but pay less out of pocket.

Deductible amounts vary greatly but often range from a low of $100 to a high of $2,000. The medium amount is around $500. The deductible may also depend on the type of car insurance coverage.

The most common types of auto coverage with a deductible include:

• Comprehensive coverage
• Collision coverage
• Personal injury protection
• Underinsured motorist coverage

Comprehensive coverage covers damage that isn’t caused by a collision, such as damage from theft, vandalism, wildfire, or severe weather. The total coverage is often limited to the value of the vehicle, with deductibles ranging from $100 to $1,000.

Collision coverage covers damage from vehicular collisions. This includes accidents involving a single car and accidents involving other vehicles. If the insurance company needs to cover damage to your vehicle, you pay the deductible.

Personal injury protection coverage may include a deductible. This type of coverage is used to cover medical expenses when the policyholder and other occupants are injured. Personal injury protection is also commonly called “no-fault” insurance and is the minimum required insurance in some states.

Underinsured motorist coverage is used to cover your expenses when you’re involved in an accident caused by an underinsured or uninsured driver. This ensures that you receive compensation when the other driver lacks coverage.

Avoid choosing a high deductible if you’re concerned about covering the cost in the event of an accident. Not being able to cover the deductible may keep you from getting the compensation that you need.

How Does the Deductible Impact My Car Insurance Rate?

Choosing a higher deductible typically results in lower premiums, which means that you pay less per month. However, the cost difference decreases with higher deductibles.

You’ll save the most when jumping from a deductible of about $100 to a slightly higher deductible, such as $250. After you reach a deductible of around $1000, the savings for higher deductibles start to decline.

Paying a Car Insurance Deductible

You don’t technically pay the deductible in most situations, as it's simply deducted from the payout.

The deductible is used when you file a claim for covered damages. This also typically applies to situations where no other policies cover the damage, such as when another insured driver is found at fault.

There are certain scenarios where you don’t pay the deductible after being involved in an accident, such as:

• You’re at fault, but your vehicle doesn’t suffer damage
• Another driver is at fault
• Your insurance includes free repairs on glass claims
• Another person files a claim against your liability coverage
• You opt for a disappearing car insurance deductible

The deductible is often only used when the insurance company needs to pay you directly for covered damages. Otherwise, another party’s insurance or your liability coverage may cover the costs involved.

For example, if your policy has liability coverage, you don’t pay a deductible when you’re at fault for someone else’s damages or injuries. If you caused the accident, a liability claim is filed. It includes coverage up to a set limit.

Liability coverage varies, with policies offering $25,000 to $500,000 per person or accident. Liability policies don’t cover damage to your vehicle or expenses for your injuries. For those situations, you need comprehensive insurance or personal injury protection.

Do I Pay an Auto Deductible After Hitting a Car?

When you hit a car, you only pay a deductible if your vehicle is damaged and you need to file a claim for collision coverage. If your vehicle isn’t damaged, you don’t pay a deductible. As mentioned, if you’re at fault for damage to another vehicle, your liability coverage is used.

Do I Pay When Another Driver is at Fault?

You don’t typically need to pay a deductible when another driver is at fault. If the other driver is insured, their insurance policy should cover your repairs.

However, if you have collision insurance, you may choose to file a claim through your insurance company. The deductible will be taken from the total payout. Your insurance company then gets reimbursed through the other driver’s insurer.

Conclusion

A car deductible is an amount deducted from the total payout when filing a car insurance claim. If your car suffers $3,000 in damages and you have a $200 deductible, the insurance company may send a check for $2,800.

Deductibles are included with insurance policies that cover damage and injuries, such as comprehensive coverage and collision coverage.

A higher deductible can result in a lower monthly payment but limits your total compensation in the event of an accident.