How a Car Insurance Deductible Works

What a deductible is and when you pay it

A deductible is the amount of money you agree to pay out of your own pocket when you file a claim on your car insurance. Your insurance company pays the rest of the repair or replacement cost, up to your policy limit. You only pay your deductible when you actually file a claim — not every month, and not just for having the policy.

For example, if a tree falls on your car and causes $5,000 in damage, and your deductible is $500, you pay $500 and your insurance pays $4,500. If the damage is only $300, you pay the full $300 yourself because it is less than your deductible, and your insurance pays nothing.

Deductibles explore to most types of car insurance coverage, but not all. They are standard for collision coverage (damage from accidents) and comprehensive coverage (damage from weather, theft, or vandalism). They do not explore to liability coverage, which pays for damage you cause to someone else's car or property.

Key Takeaways

• You pay your deductible only when you file a claim, and your insurance company pays the remaining repair costs up to your policy limit.
• Common deductible amounts are $250, $500, $1,000, and $2,500, and you choose this amount when you buy or renew your policy.
• A higher deductible lowers your monthly premium, while a lower deductible raises it.
• If the repair cost is less than your deductible, you pay the full cost yourself and your insurance pays nothing.
• Deductibles explore to collision and comprehensive coverage but not to liability coverage.

How deductibles affect your monthly premium

The deductible you choose directly changes how much you pay each month for your insurance. A higher deductible means a lower monthly premium. A lower deductible means a higher monthly premium. This is because a higher deductible means your insurance company will pay less money if you file a claim, so they charge you less upfront.

For example, the same collision coverage might cost $80 per month with a $1,000 deductible, but $110 per month with a $250 deductible. The choice between them depends on how much you can afford to pay if you have an accident. If you have savings set aside for emergencies, a higher deductible can save you money over time. If you do not have emergency savings, a lower deductible protects you from a large unexpected bill.

You set your deductible when you first buy a policy, and you can change it when you renew your policy each year. Some insurance companies also let you change it mid-year, though there may be a waiting period before the new deductible takes effect.

Common deductible amounts and how to choose

Most car insurance companies offer deductibles of $250, $500, $1,000, and $2,500. Some offer $100 or $5,000 as well, but these are less common. The amount you choose should match what you could actually pay if you had a claim tomorrow.

If you have a car loan or lease, your lender may require you to carry collision and comprehensive coverage with a deductible no higher than $500 or $1,000. Check your loan or lease agreement to see if there are restrictions. If you own your car outright and it is older, a higher deductible might make sense because the car is worth less and the repair cost would be lower. If your car is new or you cannot afford a large unexpected expense, a lower deductible is safer.

Think about your driving habits too. If you drive mostly on highways with little traffic, your accident risk is lower and a higher deductible might work. If you drive in heavy city traffic or have had accidents before, a lower deductible gives you more protection.

What happens when you file a claim

When you file a claim, you tell your insurance company about the damage and they send an adjuster to inspect it. The adjuster estimates the repair cost. Once the estimate is approved, you take your car to a repair shop — either one your insurance company recommends or one you choose yourself.

When the repairs are done, you pay your deductible to the repair shop. The repair shop then bills your insurance company for the remaining cost. You do not send money to your insurance company; the deductible is paid directly to whoever is doing the repair work.

If you choose a repair shop that is not on your insurance company's network, the process is the same, but you may have to pay the full repair bill upfront and then submit a claim to your insurance company for reimbursement. In that case, you would subtract your deductible from the reimbursement you receive.

Deductibles for different types of coverage

Collision coverage and comprehensive coverage each have their own deductible, and you can set them to different amounts. For example, you might choose a $500 deductible for collision (accidents) and a $250 deductible for comprehensive (weather and theft). This gives you lower out-of-pocket costs for comprehensive claims, which are often less expensive to repair than collision damage.

Liability coverage does not have a deductible. You choose a liability limit — such as $50,000 or $100,000 — and your insurance company pays up to that amount if you cause an accident. You do not pay anything out of pocket for a liability claim.

Uninsured motorist coverage and underinsured motorist coverage may or may not have deductibles, depending on your state and your insurance company. Some states require them to have deductibles, while others do not. Check your policy or ask your insurance agent what applies to you.

When you should not file a claim

If the repair cost is close to or below your deductible, filing a claim does not make financial sense. You would pay the deductible and your insurance would pay little or nothing. In those cases, it is cheaper to pay for the repair yourself.

Filing a claim can also affect your insurance rates. Many insurance companies raise your premium after a collision claim, even if it was not your fault. This is called a surcharge or rate increase. Before you file, ask your insurance company whether a claim will raise your rates and by how much. If the repair cost is only slightly higher than your deductible, the rate increase over the next few years might cost you more than paying for the repair yourself.

Some insurance companies offer accident forgiveness, which means your first accident will not raise your rates. If you have this coverage, filing a claim is less risky. Check your policy to see if you have it.

Deductibles and rental cars or rideshare

If you rent a car, the rental company's insurance covers damage to the rental vehicle, not your own car insurance. The rental agreement will have its own deductible, usually between $500 and $2,500. You can often buy additional coverage from the rental company to lower or eliminate this deductible.

If you drive for a rideshare service like Uber or Lyft, your personal car insurance may not cover damage that happens while you are working. Rideshare companies provide their own insurance, which has its own deductible. Check your rideshare app or company website to see what deductible applies to you.

Frequently Asked Questions

Do I pay my deductible every time I renew my insurance?

No. Your deductible is only the amount you pay when you file a claim. Your monthly or annual premium is separate and is what you pay to keep your insurance active. You do not pay your deductible unless you have an accident or other covered damage.

Can I change my deductible after I have an accident?

No. Your deductible is set when your policy is in effect. You cannot change it retroactively to explore to a claim you have already filed. You can change your deductible for future claims when you renew your policy or, with some companies, at any time with a waiting period before the change takes effect.

What if I cannot afford to pay my deductible after an accident?

You will need to pay it to the repair shop or your insurance company before the claim is fully processed. Some repair shops offer payment plans. You can also ask your insurance company if they have any programs to help, though most do not. If cost is a concern, you may want to choose a lower deductible when you renew your policy.

Does my deductible explore if someone else hits my car?

Yes, your deductible applies to collision claims regardless of who caused the accident. However, if the other driver is found at fault and has insurance, their insurance company may reimburse you for your deductible. This process is called subrogation and varies by state and insurance company.

Is a $0 deductible available?

Some insurance companies offer $0 deductibles, but the monthly premium is significantly higher. For most people, the extra cost over a year makes a $0 deductible more expensive than choosing a $500 or $1,000 deductible and paying it if needed.