Car accidents happen, and if they happen to you, you’ll need to worry about your car insurance deductible. What is a car insurance deductible, exactly? It’s the money you have to pay for damages before your insurance company starts to pay. Your deductible can range anywhere from $0 up to a few thousand dollars, with the average car insurance deductible being around $500. And while a lower deductible does sound great, it comes with a higher monthly premium for that privilege. What deductible is best for car insurance? We’ll go into that and more below.
How Deductibles Affect Car Insurance Premiums
Let’s say you have an accident, and the damages total $3,000. Let’s also say that you have a car insurance policy with a $500 deductible. Who pays the deductible in this instance? If the accident is covered by your insurance, you’d be responsible for paying the first $500 of the costs, and your insurance company would pay for the remaining $2,500.
The lower your deductible is, the less you have to pay before your insurance kicks in. But, as already mentioned, lower deductibles come with a higher monthly insurance premium.
Types of Car Insurance Deductibles
Each component of your car insurance will have a deductible attached to it. It’s possible that your deductible for different components of your insurance may be different. The two most common areas you’ll want to know about are your car insurance comprehensive deductible and collision deductible.
Your collision coverage is the component of your car insurance that kicks in when you have damage from a collision with another vehicle, property, or a single-car accident. The three most common deductibles you may see here are $0, $500, or $1,000. If you currently have a loan out on your car, the chances are high that you will be required to carry collision coverage. Other drivers who want to be covered in case they have an unexpected accident or who might not have the savings to cover a big repair bill might benefit from collision coverage.
Your comprehensive coverage is the component of your car insurance that kicks in when something happens to your car that isn’t an accident, like theft, vandalism, fire, civil disturbance, or falling objects. Generally, this is good for people who might live in higher-risk areas of any of these incidents.
The Most Common Car Insurance Deductibles
|Deductible||Six-Month Cost||Cost Difference*|
*Difference vs. next-lowest deductible
How to Choose a Deductible
Figuring out how to choose a car insurance deductible is an important decision. Should you get a $500 or $1,000 deductible? Is a $250 deductible worth the higher premium? Knowing how to choose the right car insurance deductible can help you save money while still protecting your ride.
- Monthly Payment vs. Repairs: Take a look at what your car might cost to be repaired if something happens to it. If the repairs would be expensive, it might be worth a higher monthly payment. But if you have a fairly inexpensive car and the repairs would be cheaper, it might be worth saving a little extra every month on your premiums.
- How likely are you to be in an accident: Evaluate your risk of being in an accident. Do you drive a lot every day? Do you live in a busy city known for bad accidents? How experienced a driver are you? The answers to all of these questions should play a major role in the deductible size you choose.
- Value of your car: Your insurance premiums are not just dictated by the deductible size you choose. The value of your car also plays a role. If you have a more expensive car, your premiums may already be higher. But the cost to fix a more expensive car is also usually higher. You’ll need to determine what you can afford if you have an incident and what makes the most sense for your situation.
- Your savings and how important your car is to you: Do you have sufficient savings to cover the cost of an accident? Furthermore, how important is your car for you? Are you going to be unable to get to work if you don’t have a car?
Can you Avoid Paying the Car Insurance Deductible?
Yes, in some instances, you can avoid paying your car insurance deductible. If you live in an at-fault state and another driver causes the accident, then you can avoid paying your deductible. However, the process behind that can take time. Some insurance experts advise you to pay your deductible by opening a claim with your insurance company, and your insurance company can work to get that money reimbursed for you.
In a no-fault state, you’ll be required to pay your deductible no matter who caused the accident. The current no-fault states include:
- New Jersey
- New York
- North Dakota
And lastly, there may be instances where it doesn’t make financial sense to file a claim. If the cost of the accident is lower than your deductible or close to it, you might opt to pay for the repairs yourself since you’d be paying the deductible anyway. This can help to keep your future premiums from going up as a result of the wreck.
Car Insurance Deductible FAQs
Having a $1,000 deductible means that if you’re involved in an accident or an incident, you are required to pay the first $1,000 for repairs before the insurance company begins paying out your benefits.
Yes, most car insurance deductibles are assessed on a per-claim basis. This means that every time you file a claim, you will be required to pay your deductible. It does not accumulate throughout the year, like some health insurance plans.
Generally, $1,000 is the highest deductible you’ll see from most insurance providers. However, some companies offer deductibles as high as $2,500.
Your deductible is the amount of money you pay from your own pocket when you file a claim. The phrase out of pocket generally refers to health insurance plans where you have a maximum amount of money you’d have to pay within a year. Additionally, the phrase out of pocket may be used to reference when someone chooses to pay for damages from their own pocket instead of filing a claim with the insurance company.
Anytime you choose to pay for the expenses from an accident yourself, they can be referred to as out-of-pocket expenses. This could be the cost of damage to your car, someone else’s car, medical bills, property damage, or damage to something you were transporting. Additionally, this phrase can be used to encompass costs not covered through insurance.