The deductible is one of the few numbers on a car insurance quote that you get to pick, and it has a direct effect on both your premium and what you pay when something goes wrong. Here is how it works, which coverages use one, and how to choose a number you can live with.
What a deductible is
A deductible is the amount you pay toward a covered claim before the insurance pays the rest. If your car needs a covered repair costing $3,000 and your deductible is $500, you are responsible for the first $500 and the insurer pays the remaining $2,500, up to your coverage limits. Those figures are only an example.
In practice, you rarely write a check to the insurer. The insurer usually subtracts the deductible from the payment, and you pay that amount to the repair shop. If the car is totaled, the deductible is generally subtracted from the settlement.
Which coverages have a deductible
- Collision almost always has a deductible.
- Comprehensive almost always has one too, and it can be a different amount than collision.
- Liability coverage does not have a deductible for you. It pays others for damage you cause.
- Personal injury protection and uninsured motorist property damage may carry a deductible in some states.
Glass damage is often handled under comprehensive. Some insurers offer full glass coverage with no deductible, and a few states require insurers to waive the deductible for windshield repair or replacement when you carry comprehensive.
The deductible applies per claim
Unlike some health insurance deductibles, a car insurance deductible usually applies each time you file a covered claim. Two separate incidents in one year generally mean two deductibles. It does not reset annually, and it is not a yearly total.
Higher deductible, lower premium
When you agree to pay more of each claim yourself, the insurer takes on less risk, so the premium goes down. A lower deductible means a higher premium. How much the price changes between deductible levels depends on the insurer, the vehicle and your situation, so ask to see the premium at a couple of different deductibles before you decide.
The tradeoff is simple: a higher deductible saves money every month but costs more on the day you need to use the coverage.
How to pick a deductible
- Start with your savings. Choose an amount you could pay tomorrow without borrowing or falling behind on bills. A deductible you cannot afford makes the coverage hard to use.
- Think about how often you claim. If you rarely file claims, a higher deductible may save more over time. If you have had several claims, a lower one may feel safer.
- Consider the car's value. On an older car, a high deductible combined with a low market value may leave little for the insurance to pay. At some point it may be worth reconsidering collision coverage entirely.
- Check your loan or lease. Lenders and leasing companies often set a maximum deductible you are allowed to carry.
- Set comprehensive and collision separately if it helps. Some drivers choose a lower comprehensive deductible because those claims, like hail or a cracked windshield, can be hard to avoid.
When the other driver is at fault
If another driver caused the crash, you can usually file with their liability insurer and pay no deductible at all. If you choose to go through your own collision coverage instead, which can be faster, you typically pay your deductible first. Your insurer may then try to recover its costs, and your deductible, from the at-fault driver's insurer. This process is called subrogation, and if it succeeds you may get some or all of your deductible back.
Small claims and your deductible
If a repair costs only a little more than your deductible, filing a claim may not be worth it. The payout would be small, and claims history can affect your premium at renewal. Many drivers pay for very minor damage themselves for that reason. If anyone was hurt or another vehicle was involved, though, contact your insurer regardless, because liability questions can come up later.
Quick recap
- The deductible is your share of each covered claim on your own vehicle.
- Collision and comprehensive have deductibles; liability does not.
- Higher deductible means a lower premium and a bigger bill when you claim.
- Pick an amount you can actually pay on short notice.
This article is general information, not legal, tax, or financial advice, and it does not describe any specific policy. Coverage rules vary by state and by insurer, so always read your own policy documents. Rockin Hot Rod is not an insurance carrier, agency, or broker.
