What Is a Car Insurance Deductible and How Does It Work?
A car insurance deductible is the amount of money you are required to pay when you file a claim for an insured loss. Essentially, when you have a car accident and file a claim, your claim payment will be reduced by the amount of your deductible.
Your car insurance deductible is usually a set amount, say $500. If the insurance adjuster determines your claim amount is $6,000, and you have a $500 deductible, you will receive a claim payment of $5,500. However, based on your deductible, not every car accident warrants a claim. If you back into a tree resulting in a small dent in your bumper, the cost to repair it may be $600. Since car insurance premiums can increase if you file a claim, it might be better to pay the entire amount of the damage out of pocket — that is, the extra $100 in addition to your deductible of $500, to keep your rates from increasing.
Deductibles vary by policy and driver, and you can choose your car insurance deductible when you purchase your policy. It's essential to look at deductible options when you compare auto insurance policies to see which is your best choice. Drivers looking for the cheapest car insurance should increase deductibles when they're getting a quote, but they should also be aware they may have to pay more money out-of-pocket in the event they make a claim.
Which Auto Insurance Coverage Types Have Deductibles?
Just as there are different types of car insurance coverage, there are varying deductibles based on those different types of coverage. It's essential to understand how much the car insurance deductible is for each type, so you'll know what you're expected to pay in the event of a claim.
Liability: This coverage pays the expenses of others who are injured in an accident where you are at fault. Liability car insurance coverage does not have a deductible.
Comprehensive: This coverage pays your expenses if your car is damaged by something other than a collision with another vehicle or object. This could include repairing damage from hail, hitting a deer or replacing a cracked windshield. It also will pay to cover the cost of replacing stolen items. The deductible for this coverage generally is less than the deductible for a car accident.
Collision: This coverage pays for repairs to your vehicle when you are at fault. This could be when your car is damaged in an accident with another vehicle or an object such as a tree or wall. This deductible is usually the highest deductible you will have with your car insurance policy. If your car is hit by another vehicle shown to be at fault and the owner is adequately insured, his insurance will pay for the damage to your vehicle. In that case, you would not pay a collision deductible.
Personal Injury Protection (PIP) and Uninsured Motorist: Personal injury protection coverage pays the medical expenses for the driver and all passengers in your car. Uninsured motorist coverage pays your expenses when you are in a car accident with a driver who is at fault but does not have insurance or is insufficiently insured to cover your costs. Not all car insurance policies include deductibles for this type of coverage.
What Is the Average Deductible Cost?
Because consumers choose varying types of car insurance coverage with different monetary limits, deductibles can vary significantly from one driver to the next. For most drivers, typical deductible amounts are $250, $500 and $1,000. According to MoneyGeek's data, the average car insurance deductible amount is approximately $500.
What Is Your Best Deductible Amount?
When shopping for car insurance, your rates will vary greatly depending on your coverage and the monetary amount of that coverage. Likewise, your car insurance deductible will vary based on that coverage and the cost of your premium. Generally speaking, if you choose a policy with a higher deductible, your premium will be lower. This can be a great option as long as you can pay that higher deductible in the event of an accident.
Raising your deductible is a great way to save money on your car insurance. In fact, you can save an average of $108 per year by increasing your deductible from $500 to $1,000. For those with tight budgets, choosing a lower premium and a higher deductible can be a way to ensure you can pay for your car insurance. However, if you can afford it, paying a higher premium could mean you don’t have to come up with a lot of cash to pay a lower deductible in the event of an accident.
Sample Costs for 100/300/100 Comprehensive Collision
- Deductible AmountAnnual Premium
Car Insurance Deductible FAQs
Ideally, you’d never get in a car accident or sustain damage to your car, but you’re likely to require repair to your car due to damage at some point. It’s important to have your questions regarding car insurance deductibles answered before that happens, so you know what to expect.
Key Points About Car Insurance Deductibles
If you have car insurance, you will have to pay a car insurance deductible when you file a claim for repairs and injuries. How much you pay for your deductible depends on your car insurance coverage and how much your car insurance premium is.
The average car insurance deductible is approximately $500.
The at-fault driver in the accident is usually required to pay a car insurance deductible.
Liability coverage does not require a car insurance deductible, but only covers the expenses of the other driver, not your own.
About the Author