Auto Insurance Deductible: Simply Explained (2024)

Separate from your monthly or annual auto insurance policy payments, car insurance deductibles are agreed-upon amounts policyholders pay for certain types of claims before the insurance company steps in.

Only specific auto insurance coverages have deductibles, like collision and comprehensive insurance.

So if you invest in full coverage insurance, knowing how deductibles work is vital to understanding auto insurance.

Below, learn how to buy auto insurance with deductibles, when you have to pay it, and get tips for selecting the proper deductible limits for you.

After reading about selecting the right auto insurance deductible rates, remember to enter your ZIP code into our free quote comparison tool above to receive rates from the best companies near you.

What is a car insurance deductible?

So what does deductible mean in auto insurance? It’s an agreed-upon amount that the policyholder pays for certain types of claims before the insurance company covers the rest.

This is separate from your monthly or annual auto insurance policy premium. In addition, only certain types of coverages have deductibles.

Read more: What is the difference between a deductible and a premium in auto insurance?

But how do auto insurance deductibles work?

Imagine you’re involved in a car accident that causes $7,000 worth of damage to your car, and you have collision insurance with a $1,000 deductible.

The table below shows the amount you, the policyholder, pay for the claim compared to what your insurance company covers.

In this example, your insurer pays $6,000, leaving you responsible for just $1,000 out-of-pocket.

Keep in mind that you typically get to select your deductible amount when finalizing your auto insurance policy.

So the total may be more or less than $1,000, depending on whatever limits you choose.

You can usually change your deductible amounts at any time, but it most likely will impact your monthly auto insurance costs.

Traditionally, higher deductible levels lead to lower monthly auto insurance costs. And, oppositely, that means lower deductibles typically lead to higher monthly rates.

What types of auto insurance have deductibles?

Only certain types of auto insurance coverages have deductibles.

According to the Insurance Information Institute (III), typically, the types of coverage that use deductibles only cover property damage, not the liability portions of your auto policy.

That includes collision coverage, comprehensive auto insurance, uninsured/underinsured motorist property damage, and personal injury protection (PIP) insurance, subject to state laws.

 Drivers can usually choose different deductible limits for the various types of insurances in a single auto policy.

Below is a list of some of the types of auto insurance that don’t have deductibles:

• Liability insurance
• Medical payments (MedPay) coverage
• Roadside assistance
• Rental car reimbursement policies

However, coverage limits or caps for how many of these claims you can file may apply, depending on what company you use and where you live.

So, when do you pay the deductible for auto insurance? You are responsible for the payment whenever you file a claim using an insurance type that includes a deductible.

If an at-fault driver hits you, you do not need to pay any deductibles assuming their liability insurance covers the damage they caused to your vehicle.

Let’s say the claims process is moving too slowly and you need your car repaired sooner. You can file a collision claim, pay the associated deductible upfront, and then your insurance company will request that the at-fault driver’s insurer reimburses you.

Recovering a deductible from an at-fault driver is a process known as subrogation. (For more information, read our “What is a subrogation claim in the auto insurance claims process?“).

But if an underinsured or uninsured motorist hits you, you may be responsible for paying a deductible.

What is the average auto insurance deductible?

You have the option to select your deductible limits while finalizing your auto insurance policy.

Most companies offer $250, $500, $1,000, and $2,000 limits as options. The average deductible is $500.

So, ultimately, the cost depends on how much deductible limits you choose and what company you use.

And depending on what company you use, your deductible could be as little as $100, or even $0 in some scenarios.

Some companies offer something called a vanishing or diminishing deductible. Again, details vary depending on what auto insurance company you use.

But, typically for a small fee, the company reduces your deductible amount, usually by $100 every 12-months you remain claim-free. Once you do file a claim, the deductible resets.

What should my auto insurance deductible be?

You should choose deductible amounts that you can reasonably afford to pay out of pocket just in case you need to file a claim.

Also, choose an amount that is not too high, or it may negate the effectiveness of your policy.

For example, imagine an animal dents your car while parked. The average cost to repair a dent is between $125 and $500.

But if you chose $1,000 comprehensive insurance deductible limits, you cannot file a claim for this incident.

Whereas, selecting low deductibles increases your monthly rates, raising your deductible usually lowers your costs.

So when finalizing your deductible levels, determine if you’d rather pay less per month for auto insurance or less out of pocket for repairs.

What happens if I cannot pay my deductible?

At this point, you confidently understand the deductible auto insurance definition. But how does an auto insurance deductible work if you cannot afford to pay it but need to file a claim?

Many companies require you to pay your deductible before repairs begin on your vehicle.

So what happens if you can’t afford your deductible? It may cause a delay in the repair process for your car.

Fortunately, there are a few options available to you in this scenario. For example, you might wait to file the claim until you save enough money to cover your deductible.

Or, because the insurance company typically writes a check for the repairs, you can try negotiating with the mechanic, who may discount the deductible amount you owe.

You might also consider discussing alternative payment plans with your insurance agent.

If the damage to your car turns out to be cosmetic and it is still drivable, then a claim may not be necessary after all.

Or, if the damage is very severe and you need your car back as quickly as possible, consider taking out a personal loan or a cash advance from a credit card.

However, be aware of any interest rates you may end up paying on the borrowed funds.

If it fits your budget, consider lowering your deductible amount to something you know you can afford to pay out of pocket right now before anything even happens to your car.

Just remember that this may cause your monthly auto insurance premiums to go up slightly.

Car Insurance Deductible: The Bottom Line

Ultimately, auto insurance deductibles are separate payments from your auto insurance policy rates and only apply to certain kinds of coverages.

Plus, when it comes to the cost of your deductible, you have plenty of options. So pick levels that comfortably fit your budget, just in case you ever need to file a claim.

Now that you know how to choose affordable auto insurance deductibles, enter your ZIP code into our free rate comparison tool below to receive quotes from the top companies in your region.