Car insurance can help pay for costly repairs and injuries after an accident. But it may not cover 100% of the cost. A car insurance deductible is the amount you’re responsible for paying out of pocket. Some types of coverage have a deductible, and others don’t. Whether you need to pay a deductible depends on the type of insurance claim you file and who (if anyone) is at fault.
A car insurance deductible is the amount of money you have to pay for repairs or injuries after a covered incident. Collision, comprehensive, uninsured motorist property damage, and personal injury protection (PIP) typically have deductibles. You get to choose the amount when you purchase coverage.
Paying a deductible after a covered loss is the policyholder’s responsibility. The insurance company will only pay for costs that exceed that amount. For example, let’s say you’re in an accident. Your car has $5,000 worth of damage, and you have a $1,000 deductible. The insurance company will write you a check for $4,000, and you have to pay a $1,000 deductible.
Paying a deductible isn’t a one-time event. If a deductible applies to your coverage, you must pay it every time you file a claim. If the amount of damage is less than your deductible amount, you will be responsible for paying the total repair cost out of pocket.
For example, let’s say you have $650 worth of damage to your car and a $1,000 deductible. The insurance company will only pay for costs that exceed $1,000. So, you must pay the entire $650.
Deductibles often range from $100 to $2,500. Amounts vary by insurer and the type of coverage you’re purchasing. The average car insurance deductible is $500, according to American Family Insurance. If you have more than one type of coverage with a deductible, you can select different deductible amounts for each coverage type.
There’s no right choice for everyone. The deductible amount that’s best for you depends on a combination of factors, including:
When you purchase auto insurance coverage with a deductible, you typically get to choose the deductible amount. The amount that’s right for you depends on your budget, tolerance for risk, and the value of your vehicle.
If your budget includes enough of a financial cushion to cover a higher deductible, it might make sense to opt for a higher deductible to save money on your premium. If not, a lower deductible may be a good fit for you. In general, higher deductibles are usually a better option for more expensive cars, and lower deductibles are a better option for less expensive vehicles.
If you think it’s unlikely you’ll need to file a claim, you might consider a higher deductible. No matter what amount you choose, it’s important to make sure you can afford to pay it if you need to file a claim following an accident.
Deductibles apply to some types of car insurance coverage but not to others. Here are several that typically come with a deductible attached.
If an insured driver hits you, you do not need to pay a deductible since the other driver’s insurance will cover the damage. But if you ever need to file a claim with your insurance company, you will be responsible for paying the deductible. The only way to avoid paying one is by not filing a claim. But if you don’t file a claim, you will be responsible for 100% of the repair or replacement costs at a dealership or auto repair shop.
