What is a car insurance deductible and how does it work?
A car insurance deductible is a form of co-insurance, but you are not responsible for paying it every year. You can set how high your insurance deductible is for at least four types of coverage. When choosing your car insurance deductibles, your two immediate concerns should be how much your rates will be and how much you can afford to pay out of pocket. You might save close to 30% biannually with a higher collision deductible, but your out-of-pocket costs will increase by at least 50%.
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UPDATED: Jan 9, 2022
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- A car insurance deductible is the amount you will pay for damage after filing a successful claim
- You can choose your deductible from a suggested range
- Your car insurance deductible can be as high as $2,000 with some car insurance companies, if you select that amount
What is a deductible for car insurance, and how does a car insurance deductible work? In short, a car insurance deductible is relative to how you deal with insurance after a car accident.
Your car insurance deductible is one cost that falls upon you, along with your normal rates. To borrow a term from health insurance, a car insurance deductible is a form of coinsurance. However, you will not need to pay a deductible every pay period — or every year — like you would with health insurance).
Another aspect of your insurance deductible is that is has an inverse effect on your car insurance rates. As a result, you might be wondering, How high should my deductible be? You should choose an affordable car insurance deductible but one that leaves you with affordable insurance rates.
Read on to learn more so that you can understand when you should pay a car insurance deductible and how high you should set it. And if you want to see rates from top companies in your area right now, enter your ZIP code into our free quote tool above.
What is a car insurance deductible?
Your deductible is the amount of money you pay out of pocket to enable your car insurance company to fulfill a successful car insurance claim. Unlike your insurance rates, you can set your own deductible.
How a Car Insurance Deductible Works
Of course, you will need to file a claim to cover damages and medical costs stemming from a car accident, depending on the coverage you already have. Your insurance company will subtract what you pay from the total cost of repairs, then pay the rest.
For example, say you get into a collision and repairs cost $1,000. If you have a $250 deductible, you will pay that amount and your car insurance company will cover the other $750.
When You Need to Pay a Car Insurance Deductible
Here are four basic coverages that require a deductible:
- Collision car insurance coverage
- Comprehensive car insurance coverage
- Personal injury protection (PIP)
- Uninsured/underinsured motorist property damage coverage (UMPD)
Also, if your car insurance company offers rideshare insurance, and that is part of your policy, that coverage carries a deductible as well. The same is true for mechanical breakdown insurance and windshield repair coverage.
When You Don’t Have to Pay a Car Insurance Deductible
Liability car insurance coverage does not require a deductible because it’s there to pay damages to the other party in a car accident. Your 24/7 roadside assistance requires no deductible, either.
Neither will you pay a deductible for uninsured or underinsured motorist bodily injury coverage, nor will you have a deductible for medical payments (MedPay) coverage.
You will not have to pay a deductible with your rental reimbursement coverage. However, initially, you still need to pay out of pocket with a car rental or other forms of transportation.
GAP protection can also prevent you from paying a deductible and the rest of what you owe on your leased or financed car if the vehicle is a total loss.
In some cases, you might not need to pay your deductible if you file a successful comprehensive insurance claim.
For example, your car insurance company might waive the deductible for glass repairs because you have comprehensive coverage or live in a state where glass damage is common.
Car insurance companies must waive windshield repair deductibles by law in Florida, Kentucky, and South Carolina. And Kentucky and South Carolina laws extend to all windows in a damaged car. However, a $0 windshield repair deductible is available in Arizona, Connecticut, Massachusetts, Minnesota, and New York.
Additionally, you might not pay a deductible if you are enrolled in a vanishing deductible program that your car insurance company offers. If you go a few years without accidents and filing claims, you can have a $0 deductible.
How Your Deductible Can Affect Your Rates
A higher deductible can lower your monthly car insurance rates. For example, Progressive estimates that you can save up to 29% by increasing your deductible from $100 to $250. However, that figure is based on an August 2019 Ohio filing with a six-month rate of $420.
Still, adjusting your deductible is worth considering if you want to save on your monthly, bi-annual, or annual car insurance rates.
Note that if you increase your deductible, you will pay more out of pocket should you file a successful car insurance claim. Also, if your deductible is high, it likely will cost more than the damages.
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How high can your car insurance deductible be?
The average car insurance deductible is $500, but car insurance companies offer ranges for different types of insurance:
- A collision deductible can be as low $100 and as high as $1,000 in most cases.
- Most comprehensive deductibles can be as low as $100 and as high as $1,000.
- PIP coverage can be as low as $100 but as high as $2,500, based on the car insurance company and where the coverage is available.
- UMPD can be $100 on the low end but as high as $2,000.
In many cases, your car insurance company may offer options between $100 and $2,000, including $250, $500, and $1,000 deductibles. Specialty car insurance companies may even give you an option for a $10,000 deductible.
Car Insurance Deductible Explained: The Final Word
Let’s review the meaning of a car insurance deductible and how it works:
- A car insurance deductible is the amount you have agreed to pay for repairs after a successful claim.
- Only four basic forms of car insurance and some specialized coverages require a deductible. Liability is a type of insurance that does not necessitate deductibles.
- You can save on your deductibles depending on your state, the type of repair you need, and whether or not you have a vanishing deductible.
- Your deductible can be as high as $2,500 if you have PIP insurance.
And once again, if you set a high deductible, you can lower your monthly rates. However, you will have higher out-of-pocket costs if you need to repair your car.
It might be enticing to increase your deductible to $500 or even $1,000 to save between $200 and $300 biannually, but can you afford the deductible if your car needs repairs? Balance the potential cost for repairs against what you would be comfortable with paying for your car insurance coverage.
Also, another factor to consider is how much your car is worth. You should consider only insuring an older car with liability insurance, as the Insurance Information Institute suggests.
Likewise, consider a lower deductible for a less expensive car, no matter the age. And you can use the Kelley Blue Book car evaluation tool to determine how much your car is currently worth.
Now that we’ve given you the car insurance deductible definition and explained how it affects your car insurance rates, are you ready to review car insurance quotes? Enter your ZIP code into our free quote tool below to see rates from top companies in your area.