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A car insurance deductible is the amount you are responsible to pay out of pocket when filing a claim while the insurance company pays towards the remaining covered repairs or replacement. Setting a deductible you can afford is important because a claim could occur at any time. If you cannot afford the deductible, it could delay necessary repairs and prevent you from having a working vehicle to drive. Bankrate is helping drivers understand what an auto insurance deductible is, when to expect to pay one and the factors to consider when choosing a deductible so you can make the right choice for your financial situation.
What is an auto insurance deductible?
A car insurance deductible is the amount of money you agree to pay out of pocket for car repairs or replacement after an accident. Keep in mind that a deductible would not apply for minimum coverage policies. If you have full coverage with either comprehensive or collision coverage, or both, your deductible would apply. For example, if you are involved in an accident causing $5,000 of damage to your vehicle, and you have a $500 collision deductible, the insurance company would pay $4,500 of the claim while you are responsible for $500.
You determine your auto insurance deductible amount with your insurance agent or carrier before finalizing your auto insurance policy. However, you should have the option to change your deductible at any time.
What types of car insurance deductibles are there?
Your auto insurance policy is a package of different coverages. Some coverages, like liability, pay the other party for injuries and damages if you cause an accident. But other coverages — such as comprehensive, collision, personal injury protection and uninsured motorist property damage — exist to help cover injuries to those in your vehicle and damage to your car. These coverages may have deductibles, or at least the option to include a deductible to reduce the cost of coverage.
Here are a few coverages that usually have a deductible or the option to choose one:
Optional collision coverage pays for damage to your vehicle resulting from a collision with an object (e.g., telephone pole, guard rail, mailbox, building) when you are at-fault. While collision coverage typically will not reimburse you for mechanical failure or normal wear-and-tear on your car, it would cover damage from potholes or from rolling your vehicle.
The average cost of collision coverage is around $290 per year, according to the Insurance Information Institute (Triple-I). If you file a claim for damage to your vehicle under collision coverage, the collision deductible on your policy will apply.
Optional comprehensive coverage provides protection against theft and damage to your vehicle caused by an incident other than a collision. This includes fire, flood, vandalism, hail, falling rocks or trees and other hazards, such as hitting an animal.
According to the Triple-I, the average cost of comprehensive coverage is just over $134 annually. If you file a claim for damage to your vehicle under comprehensive coverage, the comprehensive deductible on your policy will apply.
While there are many instances in which a deductible can apply, there are some scenarios where your comprehensive deductible does not apply. For example, if you have a chip or crack in your windshield, your insurer would repair the damage with no deductible in Florida, Kentucky and South Carolina. Some insurers offer zero-deductible comprehensive coverage, which means you would not pay anything if you filed a claim for any comprehensive damage but your premium would be higher.
Uninsured/underinsured motorist property damage
If you are involved in an accident with an uninsured driver or one without enough coverage to pay for your car’s damage, or in the case of a hit-and-run, you may be able to file a claim under your uninsured motorist coverage or underinsured motorist property damage coverage. This coverage is not available in every state, but it may have a state-mandated deductible amount in those where it is. In the cases where a deductible applies, it is generally low, between $100 to $300.
Personal injury protection
Depending on your state, you may have personal injury protection (PIP) coverage on your policy. This coverage helps pay for medical expenses for you and all passengers in your vehicle. It can also help cover expenses related to lost wages or if you need someone to do household tasks after an accident because you cannot do so. Depending on your state, you may have a deductible that applies if filing a claim under this coverage. Many states with PIP deductibles provide several options to choose from, and the deductible you choose can impact your premium.
What car insurance coverage types do not require a deductible?
Liability coverage is required in most states and helps cover injuries and property damage for the other party or parties if you are at fault in an accident. When you buy liability coverage, you will choose a specific amount of coverage. These coverage limits are the maximum amount the insurance company will pay the other party for a covered claim. Because liability coverage extends to others to whom you injure or cause damage, there is no deductible.
If you choose optional coverage types like roadside assistance or rental car reimbursement, there is generally no deductible, though there may be coverage limits and caps on the amount of claims you can file for these add-ons.
What is the average car insurance deductible?
The average annual cost of car insurance for full coverage is $1,771 per year with a $500 deductible for comprehensive and collision coverage. If you increase the deductible amount to $1,000 for each coverage, it could save you a couple hundred dollars annually. However, depending on how to adjust either deductible to be higher or lower — especially if you don’t keep them the same amount — you could also experience a premium increase.
Many drivers carry policies with $500 comprehensive and collision deductibles, but there are plenty of other deductible amounts available. The deductible options available to you will typically depend on the auto insurance company and policy you’re considering. It’s also worth noting that your comprehensive and collision deductibles do not have to match, and it is quite common to have one deductible that’s higher than the other.
In general, the higher the deductibles for your comprehensive and collision, the lower your overall premiums will generally be. What your car insurance deductible ends up being will depend highly on your budget and how much you can afford to pay out of pocket if you need to make a claim for covered repairs to your vehicle.
Car insurance deductibles are generally offered in amounts that include:
Factors to consider when choosing a car insurance deductible
With so many choices in deductible levels available, you may be wondering how to choose the right one. It may be helpful to consider the following as you shopping for a car insurance policy:
Do you want to pay less for car insurance or repairs?
A higher deductible will generally lower your insurance premium, but you will pay higher out-of-pocket costs if you file a claim for damage to your vehicle. Some claims may even be covered under your deductible and you might have to pay the entire amount out of pocket if you filed. For example, if you back into a tree and do $350 worth of damage to your vehicle and your collision deductible is $1,000, you will pay out of pocket for all the repairs.
If you opt for a lower deductible, your car insurance rate will likely be higher, but you would have lower out-of-pocket costs if you file a claim. If your deductible is $100 and you cause that $350 damage by backing into a tree, you would only have to pay your $100 deductible, while your insurance would pay the other $250. However, you could spend more on your premium by having a lower deductible and never end up filing a claim. This is the nature of having insurance coverage and an example of the risk both you and the insurer take on.
How much can you afford to pay out of pocket?
Before you choose a deductible, it is important to figure out what you can afford to pay if your car is damaged in an accident. If that amount is $500, you probably should not choose a deductible higher than $500. If you do, you may not be able to afford to fix your vehicle if you are at fault and need to pay the deductible for repairs.
Learn more: The cheapest car insurance companies
Does your lender have deductible requirements?
If your vehicle is financed or leased, you will probably need to carry comprehensive and collision coverages for your vehicle. If that is the case, you will need to choose deductibles for each. Some lenders will have a maximum deductible that you are allowed to carry for comprehensive and collision. It is important to check with the financial institution that handles your loan or lease to determine if these restrictions exist.
When are you not required to pay your car insurance deductible?
There will be occasions when you are not required to pay your deductible, but those are few and far between. In general, you will not be required to pay your deductible when:
Another driver is at fault
If another driver is at fault for hitting you and they are insured, you should not be responsible for paying a deductible on the claim that you file through their insurance company. Your deductibles only apply when filing a claim with your insurer.
If you have a diminishing deductible
Some insurance companies offer a diminishing deductible, or vanishing deductible, option. If you have this policy feature, the longer you go without an accident results in a reduction in the amount you would have to pay for your deductible. Usually, it is a $100 credit applied towards your deductible amount each year you are accident-free. So, for example, if you have a $500 collision deductible and do not have an accident for four years, you could receive a $100 reduction every year. Then, if you needed to file a claim, your deductible would be $100 instead of the original $500. Once you use your diminishing deductible, there is usually a time period to qualify for it again. Speak with your insurance agent or carrier representative to see if this feature is available and their criteria.