How does a car insurance deductible work? A car insurance deductible is an amount you agree to pay towards repairs after a covered claim. Your insurance company will pick up the rest of the repair bill, minus the deductible, up to your policy limit.

Having a higher deductible on your insurance policy will decrease your insurance rates, so it’s one of the top tips for how to get cheap car insurance, but bear in mind that you are taking on more out-of-pocket costs.

Continue reading to learn more about how car insurance deductibles work, average deductible amounts, how deductibles affect your car insurance, and much more.

Car Insurance Deductibles Explained

How do deductibles work in car insurance? Basically, an auto insurance deductible is the monetary amount you agree to pay in a covered claim. You can usually choose the deductible amount you want on your different insurance coverages.

So if you have a $500 deductible and file a claim for $1,000, your insurance company will give you $500 for repairs, and you will pay the remaining $500 out of pocket.

Naturally, the more you raise your deductible, the less you will pay for your auto insurance policy, as you take on some of the financial risks. While you save money by upping your deductible, you may pay more than you end up saving if you set your deductible too high on an insurance policy.

How do car insurance deductibles work?

When you sign up for insurance, you get to set what deductible amount you want for each coverage. You may choose to have no deductible if your insurance company offers that option, but you will have higher insurance rates. You can also choose different deductibles for different coverages, depending on your personal preferences and risks.

For example, you may choose no deductible for collision insurance because there is a high rate of car crashes in your area, making it more likely that you’ll file a claim in the future.

While having no deductible will increase your rates, you may save on a different coverage. You might choose a $500 comprehensive insurance deductible, for instance, because the weather and animal collision risks are relatively low in your area.

Varying your auto insurance deductibles among different coverages based on your risk of filing a claim can help you keep your car insurance policy affordable. You can also change your deductible as needed, but bear in mind that you can’t change it right before filing a claim to try to avoid paying a higher deductible.

Most of the best car insurance companies will allow you to change your deductible during your policy term (as long as you don’t have an impending claim) or during your policy renewal, although this depends upon the individual insurance company.

Does fault in an accident matter for auto insurance deductibles?

Fault matters when it comes to who is responsible for paying for the accident repairs, but it won’t affect whether you pay a deductible or not when you file a claim with your insurance company.

If someone else has caused the accident that damages your car, for example, their insurance will take care of paying for your repairs, in which case you don’t need to file a claim and pay the deductible.

If you caused the accident, however, then you’ll have to file with your insurance company and pay the deductible on your coverage. If the fault for the accident is shared, then you may end up having to file with your insurance company as well and pay the deductible.

Average Deductibles and Their Effect on Car Insurance Rates

Now that you know how car insurance deductibles work, we want to go over what common options are available to you for insurance deductible amounts. The average insurance deductible is $500, but you can usually opt for an amount that is lower or higher than the average deductible.

With each deductible increase, your monthly premium can drop anywhere from a few dollars to about $100. However, make sure you calculate the overall savings compared to the monthly amount saved. While raising your deductible over $1,000 may save you $20 a month, you may end up paying more than you saved after an accident.

When choosing a deductible amount, you should also consider your personal risk. If you have been in multiple crashes or live in a high-risk area, it makes sense to keep your deductible lower even if your monthly rates are higher.

However, if the chance of you getting into a car crash is low, it can make more sense to choose high deductible car insurance for lower monthly rates.

As always, make sure you only raise the deductible to an amount you can afford to pay. Otherwise, you run the risk of not being able to afford to fix your car after an accident. Then you will not be able to drive until you’ve saved up the money, or you will have to go into debt paying for repairs.

Choosing a Car Insurance Deductible

We’ve briefly glossed over some of the things you should consider when picking an insurance deductible, but we want to look more closely at all the factors you need to keep in mind.

Naturally, the most important factor is how much you are willing to pay towards car repairs after an accident. If you can’t afford to pay $1,000 for car repairs, don’t pick a $1,000 deductible. Instead, choose one more in your price range, such as a $500 or $250 deductible.

The other factors that you need to take into consideration include the following:

• Amount saved by the deductible. Consider the percentage you will save by increasing your deductible amount. If it is just a small amount of money, then it may be better to keep your deductible low. But if it’s significant, you can raise your deducible as long as you can afford the out-of-pocket costs.
• Coverage the deductible is for. If you are more likely to file a collision claim than a comprehensive claim, then you could go higher on the deductible for your comprehensive coverage and put the extra money saved towards a lower collision deductible.
• Your likelihood of filing a claim. Consider how likely you are to file a claim. You are at a lower risk if you’re a safe driver and have a clean driving record.
• Your emergency savings. Consider how much you have saved up for emergencies like car repairs. If you don’t have enough money in savings to pay off the deductible, you should consider a lower deductible.
• Your vehicle’s overall value. If your car is expensive to repair due to hard-to-find parts or other factors that raise expenses, you may want to consider a lower deductible so that your policy pays more for the repairs.
• Your loan or lease requirements. If you have a loan or lease on your car, you may be required to keep a certain deductible amount on coverages.
• Out-of-pocket amount you’re willing to pay. Consider how much you are willing to pay out of pocket. While you may be able to afford to pay a higher deductible after an accident, you may not want to put that much money into your car because of other expenses.

Make sure to consider how much a deductible will save you on auto insurance rates versus how much you would save on accident repairs with a lower deductible. If you would save more when filing a claim by having a lower deductible than what you would save in monthly payments, it may be smarter to choose a lower deductible.

For example, if you wouldn't save $1,000 dollars in car insurance payments within a few years by changing your deductible to $1,000, you may want to keep just a $500 deductible — especially if you are at a higher risk of filing a claim with your insurance company.

The Final Word on Car Insurance Deductibles

Higher car insurance deductibles can significantly reduce your monthly auto insurance rates, but it is important that you don’t increase your deductible beyond what you are willing to pay out of pocket.

You also want to consider how much you’ll save over time with a higher deductible versus how much you’ll save with a lower deductible when filing a claim.

If you don't want to increase your deductible but still want to save money on auto insurance, one of the best things you can do is shop around for quotes from different car insurance companies. You can use our free quote comparison tool to shop for the best car insurance rates in your area.

Frequently Asked Questions About Car Insurance Deductibles

Keep reading to see answers to the most commonly asked questions about auto insurance deductibles.

What’s the difference between deductibles and premiums?

A car insurance deductible is an amount that you agree to pay towards car repairs in a covered claim. For example, if you have a $500 deductible and your car repairs will cost $1,500, your insurance company will give you $1,000 for repairs.

Premiums, also known as car insurance rates, are the amount you pay for auto insurance coverage. Raising and lowering your car insurance deductible will affect the cost of your auto insurance premiums.

What if the deductible is more than the cost of repairing the car?

If the deductible is more than the cost of repairing the car, then you should skip out on filing a claim and pay out of pocket for repairs. This way, you don't face increased car insurance rates for having a claim on your record.

For example, let’s say you back up into your mailbox. The cost to repair the dent in your car would be $400, but you have a $500 deductible on your collision insurance. In this case, the repairs are less than your deductible so insurance wouldn't give you anything for car repairs.

Does every car insurance policy have a deductible?

No, there aren’t deductibles on every auto insurance policy. Liability insurance coverage doesn’t have deductibles, so if you carry just liability, you won’t have a deductible to pay. You may also be able to choose a zero or minimum deductible on other insurance coverages, depending on the insurance company.

When do you have to pay a deductible?

You pay your deductible anytime you make a car insurance claim. Most insurance companies simply deduct the deductible amount from the amount they pay you in a claim, so you don’t necessarily have to pay it right away if you can wait to get your car fixed until you can save up the money.