A Guide to Choosing the Right Auto Insurance Deductible

The “D” word can scare us. After all, when you’ve been in an accident and need to sort out claims and repairs, the last thing you want to think about is forking over your hard-earned money in the form of a deductible.

This is why we’ve put together a guide to auto insurance deductibles, so that you can not only feel less overwhelmed should you need to file a claim, but that you’re empowered to choose the right deductible for you from the get-go.

Let’s get into it.

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How Does a Car Insurance Deductible Work?

Deductibles are fairly straightforward. You pay a monthly or annual premium to maintain your car insurance, but then you cause an accident. Even if that accident is covered by your insurance, you’ll have to pay a deductible to essentially “activate” that coverage. By paying your deductible, your insurance provider will pay the rest of the claim, up to policy limits.

For example, you cause an accident and your car needs $5,000 worth of repairs. Your deductible is $500, meaning the car insurance provider will pay you $4,500 and you pay the other $500 for repairs.

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Deductibles & Types of Car Insurance

What’s interesting is that you don’t have to pay a deductible with every type of car insurance. Most importantly, you won’t have to pay a deductible with liability insurance, which is the minimum amount of car insurance coverage in almost every state. This is because your insurance provider is footing the bill for damage to the other driver’s car or their medical costs.

Here are some of the other types of insurance and how they work with deductibles:

Collision: This covers damage to your vehicle if you hit another car or a stationary object. You will need to pay a deductible in order to have your claim paid.
Comprehensive: This covers damage to your vehicle from something other than a collision, such as weather, theft or vandalism, or hitting an animal. You will need to pay a deductible in order to have your claim paid.
Uninsured/Underinsured Motorist: If you’re involved in an accident with someone who doesn’t have car insurance or doesn’t have enough of it, this helps cover the costs. The property damage portion of this coverage would require a deductible (repairing damage to your car), but the bodily injury portion would not (medical costs for injuries you and your passengers sustain).
Personal Injury Protection: Also known as PIP, this covers medical costs for you and your passengers in an accident (even if you caused it). It can also help with other costs relating to an accident, like lost wages or childcare. You would need to pay a deductible in order to have your claim paid.
Medical Payments: Also known as MedPay, this covers the medical costs of you and your passengers in an accident (even if you caused it). It’s similar to PIP but PIP isn’t available in every state. Sometimes MedPay is required car insurance coverage, depending on the state. You would need to pay a deductible in order to have your claim paid.
Liability: We already covered this, but liability does not have a deductible. Liability covers costs related to property damage you cause in an accident, medical costs for injuries to the other party in an accident you caused, and legal fees/damages if you’re sued as a result of the accident. You choose the amount you’re covered for when you set up the policy, but you won’t have to pay a deductible.
Roadside Assistance: This allows you to get a tow to a nearby repair shop and minor roadside fixes. This coverage usually doesn’t have a deductible, but it does have caps and limits on usage.
Rental Car Reimbursement: This covers you when you need a rental car while your vehicle is being repaired. You usually don’t have to pay a deductible for this, but it does have caps and limits on usage. More info here.

For the coverage types that have no deductible, it can feel like a win. But deductibles aren’t necessarily a bad thing. More on that next.

How Deductibles Impact on Premiums

It might be painful to shell out your hard earned money on a deductible just to get your insurance claim paid, but there is a silver lining to deductibles: they can impact the premiums you pay monthly or annually.

It works like this: an insurance provider calculates your premiums based on a number of factors. For car insurance, that can include:

Your age and gender
Your vehicle make and model
Your zip code
Your claims history
Your driving history
And more

Based on an algorithm unique to each provider, you will be quoted premiums that you have to pay monthly or annually to keep your policy active. These premiums are also based on the deductible you would pay if you submitted a claim.

Here’s where it gets interesting: a higher deductible means lower premiums, and a lower deductible means higher premiums. You can change the balance depending on how much you’re willing to spend on a deductible.

For many, it makes more sense to pay lower premiums regularly and a higher deductible should they need to submit a claim (especially if they rarely if ever have had a claim). They can end up saving much more money in the long run.

But for those who might have trouble coming up with a higher deductible with no warning, it can make sense to be safe and pay higher premiums on a regular, expected basis. That way when they do submit a claim, they can afford for their vehicle to be repaired right away instead of waiting to scrounge up the deductible.

For example, someone paying $100 for a comprehensive deductible and $500 for a collision deductible would pay $2,301 annually for full coverage car insurance. Compare that with someone paying $500 and $1,000 in deductibles, and their premiums drop to $1,951 per year.

The good news is, you can choose which option works for you and decide on the deductible that makes most sense for your wallet and driving habits.

Choosing Your Deductible

Choosing the best option for you is easier said than done. It’s an important decision, and one that you can end up kicking yourself for or rejoicing over if you need to submit a claim. So, how do you choose? Ask yourself these questions to help guide you to the right choice:

Do you want to pay less in premiums or in repairs? Remember that you will pay more in premiums for a lower deductible, but that makes it easier to get your vehicle repaired should you need to submit a claim. A higher deductible can also prevent you from making minor claims that aren’t worth the cost; for example, if there are $500 worth of repairs and your deductible is $1,000, you’d be footing the bill for the repairs. This car insurance calculator can help you figure out your options.
How much could you afford to pay with no notice? Accidents happen in the blink of an eye, and don’t allow you to save up for a deductible. If an accident happened tomorrow and you had to cough up a deductible to get your car repaired, what could you reasonably afford?
Is your vehicle financed or leased? If so, you might not have much of a choice over your deductible. Some lenders require you to have collision and comprehensive insurance on the vehicle and set maximum deductibles. You should check your contract to ensure you’re following these restrictions.

These questions can help you determine the right amount for a car insurance deductible that doesn’t leave you stranded should you need to file a claim. Still unsure? Get helpful insurance and deductible advice, including customized quotes, just by clicking here.

When Do You Not Have to Pay a Deductible?

If you’re in an accident and the other driver is at fault, you shouldn’t have to pay a deductible. This is because their insurance will foot the bill for repairs.

You might not have to pay a deductible as well if you have a policy with a diminishing deductible. These policies reduce your deductible over time (without increasing your premiums) if you stay accident-free. Eventually, your deductible could even disappear entirely.

Finally, if you have a full-glass option on your coverage, you won’t have to pay a deductible for repairs. This means that if you’re in an accident and the damage is limited to glass, you can have the repairs done without paying a deductible (as long as you have the full-glass option).

You could also opt for a collision deductible waiver, so that you can avoid paying a deductible in certain cases (more info here) Otherwise, you won’t pay a deductible in coverage types like roadside assistance or rental car reimbursement. Small wins are still wins!

What If You Can’t Pay Your Deductible?

This is a pickle. If you can’t cough up the cash to pay your deductible, your insurance provider won’t pay out your claim and proceed with repairs. So you can either pay for the repairs yourself, do nothing, or try to come up with the deductible. This is why it’s so important to choose a deductible that you can comfortably afford.

Key Takeaways: Auto Insurance Deductible

Now that you’re so well informed about car insurance deductibles, it’s time to put that knowledge to work and build a comprehensive car insurance policy that works for you. This can mean higher premiums and a lower deductible, or it can mean lower premiums and a higher deductible. It’s about taking stock of your finances, your claims history, and your driving habits to make the right choice for your needs.

Don’t wait on car insurance. Go ahead and get access to free quotes here, and you will be able to see the impact your deductible has on your rates.

We’ve got you covered.

Margaret Huntley Margaret Huntley is a creative writing and philosophy student at Western University. She has been working as a freelance writer for over two years and has written about everything from insurance, to poker, to health and wellness for international businesses.