Car Insurance Deductibles

Your car insurance deductible plays an important role in the price of your insurance. Not only does it help shape your rates, but it also defines how much you’ll have to pay before your insurance kicks in.

Drivers typically get to select how much their deductible will be, but the most commonly chosen amount is $500. It might seem like a simple choice, but picking the right deductible is a crucial decision when you get car insurance.

Read on to learn how to select the best deductible for your car insurance. Then, compare rates with as many companies as possible to find coverage that fits your budget.

What is a car insurance deductible?

Your car insurance deductible is an amount you agree to pay before your insurance kicks in. Think of it as risk-sharing — you and your insurance company have a financial stake in your car repairs. 

Paying a deductible before your insurance takes over prevents drivers from making claims for minor events.

When you need to make a claim, your insurance company will verify that your policy covers the damage to your car. After your claim is approved, your car insurance company will send you a check or pay your mechanic directly, minus whatever your deductible is.

You might be able to adjust your deductible during your policy, but you can always change it when your insurance renews.

Why might you want to change your deductible? 

The amount you select directly affects your car insurance rates. You might find it necessary to change your deductible when you need to save money.

Choosing a deductible is a simple task, but it can have long-term effects on your insurance experience. If you’re unsure how much your deductible should be, an insurance representative can help you choose the right amount.

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How do deductibles work in car insurance?

Choosing a deductible is one thing, but knowing how a car insurance deductible works is a little more complicated.

So, when do you have to pay a deductible? Most insurance companies don’t require you to physically pay your deductible. Instead, they subtract your deductible from the cost of your repairs.

For example, if a tree branch falls on your car and causes $2,000 damage, your company will subtract your comprehensive insurance deductible from the repair cost.

That means if you have a $1,000 deductible, your insurance company will pay for $1,000 worth of repairs. The remainder of the repair will be your responsibility.

Your deductible works the same, no matter what type of claim you need to make. Whether it’s liability, personal injury protection, custom parts and equipment, or any other type of coverage, deductibles will always work the same.

How much does the average deductible cost?

You generally have options from your insurer for the amount your deductible will cost. Options vary by company and insurance type but usually fit most budgets.

Most insurance companies offer deductibles in amounts of $250, $500, $1,000, and $2,000. 

Since deductibles are the part drivers must cover, most people choose $500. A $500 deductible is an affordable amount to pay for car repairs and usually keeps your insurance rates relatively low.

How does your deductible affect your car insurance rates?

How your deductible affects your car insurance rates is simple — the lower your deductible, the higher your rates.

You should carefully consider the value of choosing a high deductible. High deductible car insurance offers the cheapest rates, but you might not save that much compared to a slightly lower deductible.

While you can justifiably select a higher deductible if you have a history of being a safe driver, it might not be worth the risk.

How to Choose Your Deductible

The most important factor to consider when selecting a deductible is how much you can pay after an accident. 

According to ConsumerReports, raising your deductibles from $500 to $1,000 can cut 11% off your premium on average. While a high deductible will save you money on your monthly bill, not everyone is able to pay $2,000 after an accident.

However, your monthly rates also need to be considered. After all, what’s the point of having insurance if it’s too expensive?

There are many factors to consider when choosing a deductible, but here are a few to keep in mind:

• How much you can spend out of pocket on an emergency car repair
• The value of your car
• How much you can save by increasing your deductible
• Whether your loan or lease specifies how much your deductible should be

Another consideration is how much your deductible should be for different types of car insurance. For example, a deductible for collision insurance might be best kept low since accidents are fairly common and repairs can be expensive.

On the other hand, you might be safer choosing a higher deductible for coverages like personal injury protection or medical payments.

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Do you have to pay your deductible after an accident you didn’t cause?

Whether you pay a deductible after an incident depends on the type of insurance you need to make a claim with.

Here are some examples on when you will and won’t have to pay a deductible:

• You won’t pay a deductible if you cause an accident but don’t damage your vehicle. The other driver will be making a claim on your liability insurance. However, your insurance rates will increase.
• If your car is damaged in an accident you cause, and you want to file a collision claim, you’ll have to pay the deductible. 
• If another driver strikes you, you won’t have to pay a deductible to file a claim against the other driver’s liability insurance. 

Things get a little more complicated if you’re the victim of a hit-and-run accident. Uninsured motorist insurance will cover damage to your car if you have it, sometimes without the need for paying a deductible.

However, if you don’t have uninsured motorist insurance, you’ll have to rely on your collision insurance, which does require a deductible.

Find Car Insurance With the Right Deductible Today

The amount you select for your deductible will play an essential role in your insurance rates. While it can be tempting to choose the highest option to keep your rates down, you should make sure you can afford the deductible in case you need to make a claim.

When you need to save money, comparing quotes with multiple companies might find you lower rates than raising your deductible. An insurance representative can help you determine how much you should choose for your deductible when you look at new companies.

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