When you buy collision or comprehensive coverage, you will be asked to choose a deductible. It is one of the easiest ways to adjust your premium, but it is also one of the most misunderstood parts of a policy.
So what is a car insurance deductible, and how do you choose the right one? This guide explains it in plain English.
Key takeaways
- A deductible is the amount you pay toward a covered claim before your insurance pays the rest.
- Deductibles usually apply to collision and comprehensive, not liability.
- A higher deductible generally means a lower premium, and a lower deductible means a higher premium.
- Choose a deductible you could pay tomorrow without financial strain.
What is a car insurance deductible?
A car insurance deductible is the part of a covered loss that you pay yourself. Your insurer pays the rest, up to your policy limits.
Here is a simple example. Say you have a $1,000 collision deductible and you back into a pole. The repair bill is $3,500. You would pay the first $1,000, and your insurer would pay the remaining $2,500.
If the repair costs less than your deductible, your insurer would not pay anything. In that case, many drivers choose not to file a claim at all.
Which coverages have a deductible?
Not every part of your policy has a deductible. Here is how it usually works:
| Coverage | Usually has a deductible? | What it pays for |
|---|---|---|
| Bodily injury liability | No | Injuries you cause to others |
| Property damage liability | No | Damage you cause to others' property |
| Collision | Yes | Damage to your car from a crash |
| Comprehensive | Yes | Theft, weather, fire, vandalism, animal strikes |
| Uninsured motorist property damage | Sometimes | Damage to your car from an uninsured driver, in some states |
| Personal injury protection (PIP) | Sometimes | Your medical costs in no-fault states |
Collision and comprehensive can have different deductibles. Some drivers choose a lower comprehensive deductible because those claims, like a cracked windshield or hail damage, can happen even to careful drivers. Learn more about what comprehensive insurance covers.
How your deductible affects your premium
Your deductible and your premium work like a seesaw:
- Higher deductible: you take on more risk, so your premium is usually lower.
- Lower deductible: your insurer takes on more risk, so your premium is usually higher.
How much you save by raising your deductible depends on your insurer, your car, and your location. Ask for quotes at a few deductible levels so you can see the actual price difference.
How to choose the right deductible
There is no single right answer, but these questions can help:
- How much could you pay tomorrow? If a $1,000 surprise bill would be a hardship, a lower deductible may be safer.
- How much would you save each year? Compare the yearly premium difference between deductible options.
- How often do you expect to file claims? If you have a long commute, park on the street, or live in a hail-prone area, a lower deductible may make more sense.
- What is your car worth? On an older, low-value car, a high deductible may leave little left to collect after a claim.
- Does your lender have a limit? Some auto lenders and lease contracts set a maximum deductible. More on that below.
A simple break-even check
Here is a quick way to compare. Divide the extra amount you would pay out of pocket with a higher deductible by the yearly premium savings. The result is roughly how many years without a claim it would take for the higher deductible to pay off.
If that number is short, a higher deductible may be worth it. If it is long, the lower deductible may be a better fit. This is a rough guide, not a guarantee.
Putting the break-even check to work
Here is a hypothetical example. Say your insurer quotes you two options for collision and comprehensive:
- A $500 deductible
- A $1,000 deductible that costs less per year
The higher deductible means you would pay $500 more out of pocket on each claim. Now divide that $500 by the yearly savings. If the higher deductible saves you a meaningful amount each year, you could break even after a few claim-free years. If it saves only a small amount, it could take many years to come out ahead, and the lower deductible may be the better value.
Your own numbers will differ, so ask for quotes at each deductible level and run the math. Also think beyond the numbers. If paying the higher deductible would mean putting a repair on a credit card or skipping other bills, the lower deductible may give you more peace of mind.
Deductibles and your lender
If you finance or lease your car, check your contract before raising your deductible. Many lenders and leasing companies set a maximum deductible you are allowed to carry. Going above it could put you out of compliance with your loan or lease terms.
Deductibles when you are not at fault
If another driver causes the crash, their liability insurance should pay for your damage. In that case, you usually do not pay a deductible.
Sometimes, though, it makes sense to file with your own insurer, for example if the other driver's insurer is slow to respond. You may pay your deductible upfront. Your insurer may then try to recover the money from the at-fault driver's insurer and refund your deductible if it succeeds.
If the at-fault driver has no insurance, uninsured motorist coverage may help. See uninsured motorist coverage explained.
Common deductible questions
Do I pay the deductible every time I file a claim? Generally yes, for each separate covered claim under collision or comprehensive. Some insurers offer features such as vanishing deductibles or glass coverage with no deductible. Ask what is available.
What if my car is totaled? Your insurer typically pays the car's actual cash value minus your deductible. If you owe more on your loan than that amount, gap insurance may help cover the difference.
Tips to manage your deductible
- Keep an emergency fund at least equal to your deductible.
- Review your deductible when your finances change.
- Consider raising it as your car ages and its value drops.
- Make sure your deductible meets your lender's rules if you finance or lease.
Find the right balance
Choosing a car insurance deductible is about balancing your premium with what you can afford after a claim. Comparing quotes at different deductible levels makes the decision much easier.
Quote4Us connects you with licensed insurance agencies in our network that can show you how different deductibles affect your price. Quote4Us is not an insurance company and does not sell policies itself. Request a free auto insurance quote to compare your options.
This article is for general information only and isn't legal or insurance advice. Coverage and rules vary by state and insurer.
Frequently asked questions
Not usually. In most cases, the insurer subtracts your deductible from the claim payment. For example, if covered repairs cost more than your deductible, the insurer pays the repair cost minus the deductible, and you pay your share to the repair shop. If the car is totaled, the deductible is subtracted from the settlement amount.
No. Liability coverage pays for injuries and damage you cause to others, and it typically does not have a deductible. Deductibles usually apply to coverages that pay for your own vehicle, such as collision and comprehensive. Some states and policies also apply deductibles to uninsured motorist property damage or personal injury protection.
Yes. Most insurers let you change your deductible at any time, not just at renewal. Raising it usually lowers your premium, and lowering it usually raises your premium. Keep in mind that a change typically applies only to claims that happen after the change takes effect, so it will not help with a claim that already happened.