Understanding Car Insurance Deductibles

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4 min read

A car insurance deductible is the amount of money you agree to pay out of your own pocket for car repairs after an accident. Let’s say you’re in an accident that causes $5,000 worth of damage to your car. If your insurance deductible is $250, you’re expected to shell that part out, and the insurance will cut you a check for the remainder — in this case, $4,750.

Unfortunately, though, it’s not just as simple as having a $250 standard deductible. There are a ton of options for high deductible insurance, low deductible insurance and there are options in the middle. Finding the right balance is key to making sure you’re covered and can swing the cost not only on your deductible but your monthly payments, too.Let’s take a look at what the choices are and what might factor into your decision on what deductible to choose.

What types of car insurance deductibles are there?

It’s important to understand that deductibles only apply to certain types of insurance coverage. If you’re only carrying liability insurance, there isn’t a deductible to factor in because damage to your vehicle isn’t covered under your policy. You’re covered against damage you cause to other people’s property. If you cause a fender bender, your liability insurance will cover the damage to the other person’s bumper but not yours. If you want it fixed you’ll be paying out of pocket to do it.

So, you won’t be covered for damage to your car with a liability policy but you won’t have to deal with deductibles either. On the opposite end of the spectrum are the common types of car insurance that cover damage to your vehicle, and those are collision and comprehensive.

  • Collision offers protection in case you run into something. That something could be a guardrail, a house, or another vehicle. Doesn’t matter what you run into: if it’s a collision, your collision deductible comes into play.
  • Comprehensive, on the other hand, works to fill in any gaps left by your collision insurance. Damage can occur to your vehicle outside of collisions, and your comprehensive coverage will be what picks up most of the tab. That damage can include vandalism, theft, or weather-related issues, and it will cover you whether the damage was deemed your fault or not.

Both collision and comprehensive coverage have deductibles, which you’ll owe when you make a claim.

What’s the average car insurance deductible?

Now that we know what coverage types have deductibles, let’s look at what the average car deductible is. On average, most drivers carry policies with a $500 deductible, but you can buy a policy with a $250, $500, $1,000 or $2,000 deductible. It’s not quite that black and white, though. There are other options, too, and you’re able to pick a different deductible amount for your comprehensive and collision coverage. It’s not uncommon to have a $100 comprehensive deductible but a $500 collision deductible, or a $500 comprehensive and $1,000 collision.

What you end up with will depend on how much you have budgeted to spend on car insurance each month and how much you can afford to shell out if you end up needing repairs.

Factors to consider when choosing a car insurance deductible

Do you want to pay less for car insurance or repairs?

A higher deductible will land you lower car insurance rates each month, but you’ll be paying higher out of pocket costs if you run into something and your car needs to be repaired. If you back into a tree but only do $350 worth of damage and your deductible is $1,000, you’ll be paying out of pocket for all the repairs.

If you opt for a lower deductible, your car insurance bill will be higher each month, but you’ll have lower out of pocket costs. If your deductible is $100 and you cause that $350 damage by backing into a tree, you’re only out of pocket $100, while your insurance will pick up the other $250.

How much can you afford to pay out of pocket?

Before you choose a policy, it’s important to figure out what you can actually afford to shell out in case of major car damage. If it’s $500, don’t choose a deductible that’s higher than $500, even if it’s going to save you a nice chunk of change each month. Murphy’s Law will at some point come into play and you’ll be struggling to come up with the money for your part of repairs. Being in an accident is stressful enough; it’s infinitely more stressful if you’re trying to scrounge up the money to pay your deductible on top of it.

How likely are you to have an accident or claim?

If you’re an accident magnet, it’s probably best to choose a low deductible because chances are, you’ll end up having to pay it at some point. Even if you’re not a magnet for fender-benders, though, it’s still probably wise to avoid taking a gamble and bet against getting in an accident. Almost 20% of drivers with comprehensive and collision insurance will make a claim that requires them to pay their deductible in any given year, so the odds aren’t in your favor.

When you aren’t required to pay your car insurance deductible

There will be occasions when you aren’t required to pay your deductible, but those are few and far between. In general, you won’t be required to pay your deductible when:

Another driver is at fault.

If another driver is at fault for hitting you and they’re insured, you shouldn’t be responsible for paying a deductible on the claim. It’s a claim against their insurance, not yours, and the deductible only applies when claiming damages to your car with your insurance company. Think of it this way: if your insurance company pays for your repairs, you’re going to be paying your deductible. If your insurance pays, chances are good that you’ll pay too.

You opt not to get your car repaired.

You don’t have to get your car repaired simply because you make a claim against your insurance for damages. In many cases your insurance will send you a check for their estimate of the damages minus your portion, which is the deductible. If you opt not to repair your vehicle you can still keep the money from the claim, but it will obviously lower the value of your car to opt out of repairing it.