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

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ByKaron Warren
Edited byJonathan Ramos
ByKaron Warren
Edited byJonathan Ramos

Updated: May 20, 2024

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A car insurance deductible is what you pay out of pocket when you file a claim for repairs. You pay the deductible first, then your insurance covers the rest. This should be expected for collision and comprehensive insurance, and sometimes for other types like Personal Injury Protection.

The amount you choose for your deductible can affect how much you pay in premiums. When picking a deductible, consider your budget, how often you drive and any state-specific rules. There are also ways to avoid paying a deductible altogether.

Key Takeaways

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A car insurance deductible is your out-of-pocket cost when filing a claim for repairs. It's a shared financial responsibility between you and your insurer, which covers the remaining repair costs after you pay the deductible.

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Deductibles are standard in collision and comprehensive insurance but can also apply to Personal Injury Protection and Uninsured/Underinsured Motorist Coverage, depending on state laws. Liability insurance doesn't have deductibles.

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Choosing the right deductible is crucial. It affects your premiums and should align with your budget, driving habits and state-specific rules. Some plans and states even offer ways to reduce or avoid deductible payments.

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What Is a Car Insurance Deductible?

A car insurance deductible is the amount you're responsible for paying when you file a claim with your collision or comprehensive insurance provider.

Essentially, it's your share of the repair costs.

When you need your car fixed after an accident or other covered event, you and your insurance company contribute to paying for the repairs. You cover the deductible, and your insurer takes care of the remaining amount, known as the settlement. This way, the financial burden is shared.

Which Coverages Have Deductibles

Typically, coverages that include deductibles are collision and comprehensive insurance. However, depending on your state's regulations and your specific policy, Personal Injury Protection (PIP) and Uninsured/Underinsured Motorist coverage may also have deductibles.

Liability-only car insurance, which includes bodily injury and property damage, does not have car insurance deductibles.

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    Collision Insurance

    Collision coverage helps pay for repairs if you're involved in an accident with another vehicle or object. You'll pay your collision deductible, and the insurance company will cover the remaining repair costs up to your policy's limit.

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    Comprehensive Insurance

    A comprehensive policy covers damage to your car from events other than collisions, such as theft, vandalism or natural disasters. Like with collision insurance, you'll pay the deductible, and your insurer will cover the rest up to the policy limit.

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    Personal Injury Protection (PIP)

    Personal Injury Protection coverage pays for medical expenses and sometimes lost wages or other damages, regardless of who is at fault in the accident. Some states and policies allow for a deductible with PIP coverage.

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    Uninsured/Underinsured Motorist Coverage

    Uninsured/Underinsured Motorist coverage helps pay for repair expenses if you're in an accident caused by a driver who either doesn't have insurance or whose coverage is insufficient. Generally, you don't have a deductible for this type of coverage, but in some states and under certain policies, you may have one.

Additionally, some states, like California, offer the option to get a Collision Deductible Waiver. With this waiver, if you're hit by an uninsured driver who is entirely at fault, you won't have to pay a deductible before your insurance kicks in to repair your car.

In New Jersey, the deductible amount is $500. And in Texas, it's $250.

How a Car Insurance Deductible Works

Imagine you're in a minor accident that results in $1,500 worth of damage to your car. Your insurance policy has a $500 deductible. You'll pay the first $500 for the repairs, and your insurance company will cover the remaining $1,000.

An infographic explaining that car insurance pays the difference between the damage to your vehicle after you meet your deductible.

What Is the Average Deductible Amount?

According to MoneyGeek's data, the average car insurance deductible amount is $500. However, you can usually choose between $250, $500 or $1,000 for comprehensive and collision deductibles.

Choosing the right deductible is key.

A higher deductible, such as $1,000, can contribute to cheaper car insurance costs, but ensure it aligns with your budget in case of accidents. Also, state laws can affect your choice. In South Carolina, you won't pay a deductible for glass repairs, and in Kentucky, windshield replacements have no deductible. Make sure to factor in these rules when picking your policy.

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A diminishing or vanishing deductible shrinks your deductible amount each year you don't file a claim. For example, a $500 deductible could drop to $400 after one claim-free year. It can save you money if you're a safe driver. The best car insurance companies that offer this add-on include Liberty Mutual and Allstate.

How to Choose a Car Insurance Deductible

When picking a car insurance deductible, consider what you can afford and how likely you are to file a claim. Account for your driving habits, your car's value and any high-risk drivers on your policy. The aim is to balance lower premiums with a deductible you can actually pay if needed.

Consider your budget

Choose a deductible that fits within your budget. You'll need to pay this amount out of pocket if you file a claim, so make sure you can afford it.

Weigh premium costs

Higher deductibles usually lead to lower premiums. However, you'll need to pay that deductible upfront if you file a claim, so balance the long-term savings against the short-term costs.

Assess driving habits

If you drive frequently or in high-risk areas, consider a lower deductible to minimize your out-of-pocket expenses in case of an accident.

Evaluate your car’s value

A high deductible may not be cost-effective if your car is older and has a lower market value. You could end up paying more in deductibles than the car is worth.

Check state laws and insurer features

Some states have specific rules about deductibles, and some insurance plans offer features like diminishing deductibles. Factor these into your decision.

Gauge your risk tolerance

Assess your comfort level with financial risk. If a high deductible makes you uneasy, opt for a lower one, even if your premiums will be more expensive.

Research local repair costs

Check the average car repair costs in your state. If they're high, consider a lower deductible and higher premium to expedite the repair process. If repair rates are low, a higher deductible might make more sense.

Remember, if your repair costs are cheaper than your deductible, filing a claim might actually cost you more.

Factor in high-risk or new drivers

If someone on your policy is a high-risk or new driver, you'll be more likely to have to file a claim and pay out the deductible.

Choosing a full coverage policy with a $1,000 deductible could save you an average of $108 per year compared to opting for a $500 deductible.

Ultimately, the decision hinges on your comfort with your annual or monthly premiums and your ability to handle unexpected out-of-pocket costs.

Sample Costs for 100/300/100 Comprehensive Collision

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How to Avoid Paying a Car Insurance Deductible

Your state laws or insurer may offer options to skip paying deductibles. For example, some plans reduce deductibles over time, and some states waive them for specific repairs.

  • Sign Up for Diminishing Deductibles: Some insurance plans offer diminishing deductibles that reduce your deductible amount for each year you don't file a claim. This could eventually eliminate your deductible altogether.

  • Don't File a Claim: If the cost of repairs is less than or close to your deductible, it might be more cost-effective to pay for the repairs yourself.

  • Use a Collision Deductible Waiver: You can add a collision deductible waiver to your policy in some states. If you get hit by an uninsured driver who is at fault, you won't have to pay a deductible.

  • Benefit From State Laws: Some states, like South Carolina and Kentucky, have laws that prohibit insurers from collecting deductibles for certain types of repairs, such as windshield replacements.

Car Insurance Deductible FAQ

Avoiding car accidents and vehicle damage is the goal, but eventual repairs might be necessary. Addressing your car insurance deductible questions beforehand ensures you're prepared for any unforeseen events.

When do you pay the car insurance deductible?
Can you avoid paying the deductible?
Do all types of car insurance have deductibles?
What effect does a deductible have on insurance premiums?

About Karon Warren

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Karon Warren is a professional journalist who has covered personal finance, health insurance, home insurance, car insurance, mortgages, banking and more for two decades.

Karon earned her bachelor of arts degree in journalism from the University of Southern Mississippi. She is also a member of the American Society of Journalists and Authors. Karon uses her journalist skills to create in-depth, well-researched finance stories that educate people so they can make informed financial decisions that best serve their financial goals.