The deductible on your car insurance is the amount you must pay out of pocket when you submit an accident or broad claim with your insurance carrier. The deductible you choose will affect your premium, and it can be important to choose one that you can afford to avoid financial stress should something go wrong. But how does auto insurance deductible work? This topic is answered, as well as when to apply and how to select a deductible amount for your vehicle insurance coverage.
The main points
A higher deductible can lower your premium, but the amount should be something you can comfortably afford out of pocket.
Higher deductibles usually result in lower premiums, but it's not always the most efficient way to save on your car insurance.
There may be different deductible options for different types of insurance, and some forms of insurance (such as liability) have no deductible.
How does the auto insurance deductibles work?
You may be familiar with the term "deductible" but may be wondering what a car insurance deductible is. Simply explained, it is the amount you agree to pay out of pocket following a covered accident to repair or replace your car. Note that the deductible does not apply to the liability portion of your policy, because liability does not cover damage to your vehicle. If you have comprehensive coverage or collision coverage, or full coverage with both, separate deductibles apply for each. For example, if you were involved in an accident that damaged your car for $5,000, and you have a $500 collision deductible, the insurance company would pay $4,500 of the claim while you would be liable for $500.
Choosing a higher car insurance deductible will usually lower your premium, because it means the insurance company won't have to pay more if you file a claim. But remember that a higher deductible means that you will have to pay more in the event of a claim where the deduction applies. You determine the deductible for car insurance with the insurance agent or carrier before finalizing the auto insurance policy. However, you should have the option to change your discount at any time.
What types of auto insurance deductibles are there?
Your car insurance policy is a package of different types of coverage. Some types of coverage, such as liability, can pay for injuries and damages to another party if you cause an accident. Other types of coverage—such as comprehensive protection, collision and personal injury protection, and property damage to uninsured drivers—are available to help cover injuries and damage to your vehicle. These forms of coverage may have a deductible or the ability to add one to lessen the cost of coverage.
Here are some types of coverage that usually have a discount or opt-in option:
Comprehensive
Comprehensive coverage provides financial protection against damage to your vehicle due to an accident other than a collision. This includes theft, fire, flood, vandalism, hail, falling rocks or trees and other hazards, such as striking an animal. The comprehensive deductible is the repair or replacement cost of your vehicle that you have agreed to pay if you file a claim under your comprehensive coverage. If the repair cost is less than the Comprehensive Deductible, then you will pay for the repair at your own expense.
While there are many situations in which a discount may apply, there are some situations in which an itemized discount does not apply. For example, you may have the option to buy a "whole glass" option on your comprehensive coverage. This means that if you have a chip or crack in your windshield, or other windshield damage to your car, you don't have to pay your comprehensive deductible at all. Many states do not allow insurance companies to apply a discount to glass replacement. Some insurance companies also offer non-deductible comprehensive coverage, which means you won't pay anything if you file a comprehensive loss claim, but your premium will be higher.
Collide
Collision coverage covers damage to your vehicle as a result of accidental collision with an object, building or vehicle. Collision coverage will not compensate you for mechanical failure or general wear and tear on your vehicle. If you make a claim for vehicle damage under collision coverage, the collision discount will be applied to your policy.
Collision rebate options typically range from $0 to $2,500 and can be higher. Collision coverage costs money, so this will likely result in a higher premium, but you can control some of those premiums with your deductible level. Just like with an all-inclusive, a higher discount usually means a lower premium. Since collision claims are more expensive than comprehensive claims, the collision deductible will usually have a greater impact on your premium. If you choose not to add collision coverage to your policy, you may avoid higher insurance premiums, but In the case of an accident in which you are at fault, you will be liable for vehicle damages.
Property damage to uninsured and underinsured motorists
It provides coverage for property damage to uninsured or underinsured motorists if your car is damaged by an underinsured or uninsured motorist, and can also be applied in a hit-and-run situation. Underinsured and uninsured driver coverage is optional in most states, but required in others. You may have the option to choose a deductible if your state offers an uninsured and uninsured driver's property damage option. The bodily injury liability portion of these types of coverage—which pays for your injuries and those of your passengers if you're hit by an uninsured or underinsured driver—is usually a "no deductible."
Protection from physical injury
Depending on your situation, you may be required to have personal injury protection (PIP) on your policy, or it may be optional. In many states, it is not served at all. This coverage can help pay for medical expenses for you and the passengers in your car. It can also help cover expenses related to lost wages or household responsibilities after an accident. You may have a deductible that applies to filing a claim under this coverage. Many states with PIP deductibles offer several options to choose from, and the deductible amount you choose can affect your premium.
What types of auto insurance coverage do not require a deductible?
Liability coverage is required in most states and helps cover injury and property damage to another party or parties if you are at fault in an accident. When you get liability insurance, you will select a specified amount of coverage. These coverage limits are the maximum amount an insurance company will pay another party for a covered claim. Since liability coverage is designed to cover third party injuries and vehicle repairs, there are no deductibles.
If you choose optional types of coverage such as roadside assistance or rental car reimbursement, there are generally no deductibles, although there may be coverage limits and claim limits you can apply for these add-ons.
How do auto insurance deductions affect premiums?
Bankrate's study of average auto insurance premiums and deductible levels nationwide confirmed what members of our authorized dealer team already know - in general, the higher the auto insurance deductible, the lower the premium. Higher deductibles indicate that you are ready to pay more out of pocket if you make a claim, therefore insurance companies charge you less, although the difference isn't usually that big. Also keep in mind that our study focused on drivers with clean driving records. If you have an accident or an over-ticket cost on your policy, you can see significant savings by increasing your deductibles. While your deductible level can be a tool to help you control your premiums, it is not always the most efficient way to save on your car insurance.
Higher Deductibles: Choosing higher auto insurance deductibles can lead to slightly cheaper auto insurance premiums. However, you should first consider whether you can pay the deductible at any time without sacrificing your money. If not, it might make sense to opt for lower discounts while holding a slightly higher premium.
Low Deductibles: Low deductibles mean you won't have to pay more out of pocket if you're involved in a collision or comprehensive claim. While this is true, low discounts can also encourage drivers to file claims more often, which can increase your rates over time if you have too many at-fault incidents.
Average full coverage premium at the deductible amount
Below, we show the average cost of car insurance with different deductible levels. Our standard profile prices include a $500 all-in and $500 collision deductible, so there is no yearly premium effect at this level.
Comprehensive/Collision Deductible Average annual full coverage premium Annual Premium
100/500 $2301 +$287
250/500 $2150 +$136
500/500 $2,014 $0
500/1,000 $1,951 -$63
1,000/1,000 $1,786 -$228
* Premium effect is adjusted deductions of $500 inclusive and collision deductible
Small changes in your deductible levels—such as changing from a $250 blanket deductible to a $500 blanket deductible—change your premium only marginally. However, big changes can have a big impact. If you have a $100 comprehensive deductible and a $500 collision deductible, increasing both to $1,000 can save you more than $500 per year on average.
How do I choose my car insurance deductible?
With so many options available at deductible levels, you may be wondering how to choose the right one. It may be helpful to consider the following when purchasing a car insurance policy.
Want to pay less for car insurance or repair?
A higher car insurance deductible will lower your premiums overall, but you'll pay more out-of-pocket costs if you make a claim for damage to your car. Some claims may be less than the deductible amount, and you may have to pay the full amount out of pocket. For example, if you return to a tree and damage your vehicle worth $350 and your collision deductible is $1,000, you will pay out of pocket for all repairs.
If you choose a lower deductible, your car insurance price will likely be higher, but your out-of-pocket costs will be lower if you file a claim. If the deductible is $100 and you hit a tree and cause $350 in damage to the car, you only have to pay the $100 deductible, and your insurance pays the remaining $250. However, you may end up spending more on your premiums with a lower deductible and never filing a claim. This is the nature of insurance coverage and is an example of the risks that you and the insurance company bear.
How much can you pay out of pocket?
Before choosing a deductible, most insurance professionals advise you on what you might pay if your car is damaged in an accident. If your budget allows for an out-of-pocket expense limit of $500, you probably shouldn't choose a deductible higher than $500. If you do, you may not be able to afford to repair your car if you need to pay a deductible for the repairs.
Does your lender have deductible requirements?
If your car is financed or leased, the lender will likely require you to carry comprehensive coverage and collision coverage for your car. If so, you will need to choose deductions for each. Some lenders will have limit deductions for the all-in collision that you can carry. It is important to check with the financial institution handling the loan or lease to see if these restrictions are in place.
What are the risks of claiming in your area?
There are a number of factors to consider when assessing claim risk for your area. For example, densely populated areas, such as cities, are more likely to be involved in a car accident than less densely populated rural areas. Likewise, extreme weather events and natural disasters are another factor to consider when assessing claim risk in your area. If you live in an area that experiences more severe weather, such as hail, snow, or wildfires, this increases your risk of obtaining weather or climate-related coverage with your insurance provider. A claim must be submitted at some point to cover related damages or damages.
Other factors to consider when assessing claim risk include the overall crime rate in your zip code and even the quality of the roads. If you ultimately decide that you are in a high-risk area for a claim, choosing a lower deductible makes sense because it means reducing your expenses if you need to file a claim. Conversely, if the risk of a claim appears to be low, it may make sense to choose a higher deductible, since auto insurers usually charge less for policies with higher deductibles.
When do you not have to pay your car insurance deductible?
There will also be times when you do not need to pay a deductible for your car insurance. Generally, you usually won't have to pay the deductible in the following scenarios.
Another driver is at fault
If another driver is found at fault in an accident and is insured, you will not be liable to pay the deductible on the claim you have submitted to their insurance company. Your discount only applies when you file a claim with your insurance company.
You have a diminishing deductible
Some insurance companies offer a discounted deductible or a cancelable deductible option that can reduce or eliminate your deductible. This policy feature can reduce the tolerance over time if it remains free of incidents and violations. Once the discounted discount is depleted, there is usually a period of time to qualify for it again. This option is not accessible with all carriers.
You buy the full glass option
If you have a full glass option on your comprehensive coverage and the damage to your car is limited to glass, you won't have a deductible to pay. Not all companies offer this option, and it may be automatic in some states. In certain areas, insurance companies are not permitted to charge a deductible for windshield repair and replacement.
You have a collision deductible
Some states and auto insurance companies offer what is known as a waiver of the collision deductible for an additional fee. If your policy includes this additional protection, you may be able to avoid paying the deductible if you are involved in accidents where the other driver is determined, uninsured, and total collision.
Methodology
Bankrate uses Quadrant Information Services to analyze the 2023 rates for zip codes and carriers in all 50 states, and Washington, D.C. rates are determined based on population density in each geographic area. Quoted rates are based on a driver who is 40 years old with a clean driving record, good credit, and the following full coverage limits:
- $100,000 bodily injury liability per person
- $300,000 bodily injury liability per accident
- $50,000 for property damage liability per accident
- $100,000 uninsured motorist injury per person
- $300,000 injury to an uninsured motorist per accident
- $500 collision deductible
- $500 for the all inclusive discount
Comprehensive Discount: Prices are calculated by reviewing our base file at the following deductible amounts: $100, $250, $500, and $1000.
Collision Deductible: Rates are derived using our basic profile and deductible levels of $500 and $1,000.
Our Website Listick utilized the minimal coverage required by each state to calculate minimum coverage limitations. Twenty of our personal drivers own a 2021 Toyota Camry, commute five days a week and drive 12,000 miles a year.
These are sample rates that should only be used for comparison.
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